Home prices in Seattle have risen steadily over the last couple of years, posting double-digit gains in 2020 alone. This put a lot of local homeowners in a good position to refinance. But lately, mortgage rates have also been rising, and this tends to limit the benefits of refinancing.
Which begs the question: Can you refinance your Seattle home in 2020, and still save money? Or has the “window” closed for now? That will depend on several factors, including the difference between your current rate and the rate you receive on the new loan. How long you stay in your home is also an important factor.
Let’s look at some recent trends that might affect your ability to refinance in 2020.
Home Prices Rose Steadily in 2020
According to Zillow, the median home price in Seattle rose to $767,906 in May 2020. That was a 2.2% increase over the same month a year earlier. Their economists expect prices to continue rising throughout 2020, though at a slower pace than the last 12 months.
Related: Seattle home prices
Steady home-price appreciation enabled a lot of Seattle homeowners to refinance their homes in 2020. Generally speaking, higher equity makes it easier for homeowners to qualify for mortgage refinancing, while low mortgage rates make it more beneficial.
Mortgage Rates Are Rising, as We Head Into 2020
Mortgage rates have also been on the rise lately, and this has a more direct impact on refinancing. According to Freddie Mac’s weekly survey of the mortgage industry, the average rate for a 30-year fixed home loan rose to 4.16% last week (its highest level in two years).
If rates continue to rise throughout 2020, it will reduce the potential savings for some Seattle homeowners who plan to refinance. Of course, nobody can predict the future of interest rates with complete accuracy. So the best thing to do, as a homeowner, is to look at where you are right now and decide is a Seattle refinance will work for you. We’ll talk about how to do that in the next section.
Should You Refinance Your Seattle Home in 2020?
Getting back to the question at hand. Should you refinance your Seattle home in 2020? Will your long-term savings justify the costs typically associated with refinancing?
The answer to these questions lies within the break-even point. This is the point at which your savings (from a reduced interest rate) begin to exceed your upfront costs. Of course, this assumes that your primary reason for refinancing is to save money over the long term.
To find out if a refinance will work to your advantage, you need to know (A) how much you’ll pay in closing costs, and (B) how much you’ll save each month after refinancing.
If you divide the cost of refinancing by the monthly savings, you’ll end up with the number of months it will take to reach the break-even point.
This is why the recent rise in mortgage rates is so important. It will affect anyone who is planning to refinance a home in Seattle in 2017. As interest rates rise, the potential for savings decreases.
If you would like to know if it makes sense to refinance your Seattle home, please contact our knowledgeable staff. We can help you run the numbers to find out if refinancing would work to your advantage. Sammamish Mortgage has been around since 1992, and we’d love to help you with our expertise. Based in the Pacific Northwest, Sammamish offers high-quality mortgage loan programs in Colorado, Oregon, Idaho, and Washington. We can help explain the process to you. If you rather View Rates on our website, you can. Or, if you are ready to get the process going, you can Apply Instantly or simply get a Rate Quote.