Refinancing question - personal to commercial loan

[Hunter Letchman]

All, I have a question for the group. A friend and I were discussing his SFRH that is currently financed on an ARM at 3.5%. He originally acquired the house as a primary residence, later converted it to a rental property, and the ARM will reset in '15. The question is this:

Is it better to refinance now at low rates or, pay down the principle and then try to refi? The primary balance is about $140k. The refi will be for a commercial loan, which of course carries a higher interest rate than the ARM. There has been a lot of talk lately about interest rates skyrocketing next year and we were wondering what the general consensus here on BP is.

I'm also considering refinancing a property so any help is much appreciated.

Thanks!