patrick.net

Not enough information. Likely years of ownership, amount borrowed, closing costs, how badly is the market declining.
My mortgage rate in 1980 was 13%.
4.875% for 30 years is a historically fabulous rate. 3.875% is obviously better, but year 6 is an unknown both for interest rates and home values. People who bought in 2006 cannot refinance now.

Depends on the rate caps, both overall and yearly. On a 5/1 ARM with BOA, the rate caps are 1% yearly and 5% lifetime. In this scenario, I tested what would happen compared to the 30 year fixed:

My test included taking the 5/1 and paying what the 30 year fixed would be, thereby paying down principal. With those caps in place, the payment NEVER was higher than the 30 year fixed would have been, and if you pay the amount the 30 year fixed would have been you pay it off about seven years early...if that makes sense. Since you have 5 years to retire a great deal of principal at a lower rate, you dont run the risk of having a higher payment down the line because in effect, you have seven years of the same interest rate or lower. (six in your example)

The spread was greater for the test I ran though. 1% is probably not worth it. I am looking at 1.75% spread between 5/1 ARM and 30 year fixed.

At 1% spread if your arm adjusts to the highest rate possible, 8.875 from 3.875 it will cost you more money vs a fixed rate. Basically it is a gamble of how high do you think interest rates will go.