A few years back, some friends of mine were trying to convince my husband and I to buy a house (they had just bought, and now “own” two houses). We kept on using the online mortgage calculators and determined we could not buy a house that we would want to live in for an extended period of time. Then one day those friends were with my husband and I looking at real estate online. When my husband went to use the online mortgage calculator, one of our friends said “you are doing a thirty-year fixed? You’ll never be able to afford a home that way.” So I said “if we get a mortgage with an adjustable rate, what happens if the rate adjusts higher and we can’t afford it?” And she replied, “you just refinance your mortgage.” And I responded, “What happens if you can’t?” There was silence before she muttered “you’ll be able to.” I was surprised that my friend took on an ARM mortgage without even considering that things might change and make refinancing not an option. At that time, I thought she was not being realistic and probably in the minority. But now that I have followed the housing market for a while, it seems that attitude was pretty common.
