An expensive proposition would be buying a house. This is the only thing that a lot of people will buy and it will take them decades to pay off. As such, it is not something most buyers enter into lightly. The financial demands are significant and the payment has to be made each and every month for the next thirty years or so. There are complexities on the process and adding to these are the current sky-high prices of housing and the fact that interest rates are steadily rising. What this adds up to is a situation where many buyers may find themselves looking at loans that they can barely afford to pay.

Lenders are aware of these market situations that have made buying a home a difficult endeavor. A wide variety of loan options in order to meet the needs of just about anyone is created as a response of the industry. Some of these loans, however, offer terms that can make buying a home somewhat of a risky proposition. Creating huge increases in the monthly payments are option ARM and interest-only loans which can both shock buyers several years down the road when they adjust. Yet sometimes, when the buyer asks about these things, the lender will reply with “You can refinance later.”

In theory, that is correct. The buyer should be able to refinance at any time assuming that the loan has no overly expensive early payment penalty. But it is one thing to be able to refinance and it is another thing to have market conditions that make refinancing a smart move. Most people can remember the late 1970′s, when interest rates for houses topped 15%. While rates have been near historic lows recently, there is no guarantee that they will not rise to that level again. But this could mean that refinancing would certainly be a bad idea if they do.

You may be aware that there are other unforeseen circumstances that might arise besides interest rates. It’s possible for the economy to take a downturn and also, you might have to take a pay cut. Or the market could soften, causing property values to decline. Either of these could make refinancing a house that you can only barely afford difficult or even impossible several years from now.

Generally, when a lender tells you that you can always refinance later, then he or she is telling the truth. But taking out a home loan that has terms stretching your finances now all the while assuming that by refinancing you can make it better later is poor financial planning. If the loan you are considering is expensive to the point where refinancing later is a necessity, you are probably buying a house that you cannot afford.

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