When to Lock In That Adjustable-Rate Mortgage

Two years ago I took out a $450,000 adjustable-rate mortgage (ARM) indexed to the one-month London Interbank Offered Rate Index (LIBOR ). It had a margin of 1.375%, and I paid 7.5% during the first month. The loan adjusts every 30 days, with no monthly cap on how much it can move. Over the life of the loan, my rate can be no lower than 3% and no higher than 13%.

Currently, my rate has slipped to 3.5%, where it's been for the past couple months. I've used this low rate to pay off additional principal and now have a balance of $424,000 with 28 years remaining.

I plan to remain in my house for between 15 and 40 years. My wife has a stable position as an anesthesiologist, and I am currently an at-home dad who trades a lot. How do you calculate when to lock in a fixed-rate loan when your ARM is at 3.5%? Any thoughts from you or the experts on a situation like this? Surely I am not alone.
-- J.L.

You are not alone. ...