Yours is a classic "can't have your cake and eat it too" situation. You can't have both the lowest rate and the security of a fixed rate. Let's plug in some market rate numbers.

As I write this, I see that a jumbo fixed rate mortgage is running right around 6.375 percent with zero points. On a $360,000 loan, the principal and interest (P&I) payment would be $2,246 per month.

Early this year, the rate would have been closer to 5.50 percent, making the monthly P&I $2,044 -- a difference of $202 per month. Clearly, if you thought you were stretching yourself with a P&I payment of $2,044, $2,246 just adds salt on the wound.

You love the house so let's not dwell on where interest rates are. We can't do anything about that. But we can come up with alternatives that may make some sense.

Clearly an ARM will lower the rate temporarily and relieve some of the pressure on the mortgage payment. For example, let's consider a 5/1 ARM, which carries a fixed rate for the first five years and adjusts annually thereafter. As of this writing, you might find a 5/1 ARM with an initial rate of 4.50 percent.

At 4.50 percent, the P&I payment would be $1,824 per month. That's a difference of $422 per month compared to the fixed rate.

Think of a fixed rate mortgage as taking out an insurance policy. For an extra $422 per month for the next five years, you are guaranteed that your mortgage payment will never change. Or you can forego the insurance policy and save the $422. But the risk is that you don't know where your rate might be at the end of five years.

When you think about it, the $422 is a pretty expensive insurance policy. Over five years, you would have saved $25,320 by taking the 5/1 ARM at 4.50 percent. Or another way of putting it, you are opting out of the insurance policy of a fixed rate that would cost you $422 per month for the next five years.

Would something like that pay off? Well, let's think about what would have to happen for the fixed rate to be the better choice.

First, interest rates would have to remain stable or increase for the next seven years. This would eliminate any refinance opportunity. If rates drop, you would be smart to refinance and pay off the 5/1 ARM anyway.

Second, at the end of the five year period, interest rates would have to be considerably higher and remain high for several years. If interest rates are low in five years, your ARM will not adjust to a higher rate. Remember that you're ahead of the game by $25,320 because you opted against paying for the fixed rate, or insurance premium. Only after you have spent the $25,320 by paying a higher rate will you start losing money. Depending on what rates do, that could be many years in the future.

The question remains: Do you tighten your belt and go with the higher, less affordable fixed rate or do you take your chances on a much cheaper and more affordable ARM? This decision must be made by the borrower, not the loan officer. It's the loan officer's job to assess the needs of the borrower and lay out the menu of viable programs. A good loan officer will be able to do this for you in more detail than what's relayed to you in this column.