If your ‘fixed rate’ mortgage becomes variable after 3 years, you don’t have a fixed rate mortgage, you likely have what is known as a 3/1 ARM or a hybrid ARM.

Plotting on refinancing, without having a backup plot, can result in the loss of your house. You should know what your payment could increase to, and be prepared to pay that payment if you cannot refinance, or be prepared to sell the house before the payment increases.

There are many reasons that they may not have been able to refinance, including some that you can do nothing about:
- Interest rates may have increased, resulting in higher payments than they qualified for
- They may have had a loss in income (lay-off, cutback in hours, etc.) since they bought the house
- They may have bought the home using income from two spouses and since divorced, and the spouse left with the house may not have qualified on their own for financing
- Their credit scores may have gotten worse (or been terrible and stayed terrible)
- Values in their area may have decreased, so they were not able to borrow as much money as they owed
- They may have had what are known as ‘option’ ARMs where they have the option of 4 different payments, and chosen to pay the minimum payment, which doesn’t pay the mortgage company even as much as is owed in interest each month. If this occurs, the principal balance goes up each time, not down. By doing this every month, they end up owing more than the house is worth and cannot refinance for as much as is owed on the loan.