Cash-Out Refinancing in Colorado: Trends in 2022

Published:
February 9, 2020
Last updated:
May 6, 2022
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Mortgage interest rates were very low for a long time, but they have been on the rise over the past year, and are expected to continue increasing over the foreseeable future.

Given this, are homeowners still considering refinancing their mortgages in Colorado? And is it something you should consider for yourself?

Is Now a Good Time For a Cash-Out Refinance in Colorado?

Is now the time for you to consider a cash-out refinance? The average price of homes in the state of Colorado is steadily increasing. The market in the state is considered hot right now, the prices are still in a steady climb.

As of May 2022, the median home price in Colorado is $569,952. Values for homes in the state have increased a healthy 23.9% over the past year and are expected to continue climbing over the next 12 months. With property values on the rise, homeowners are benefiting from increased equity in their homes simply from appreciation.

Mortgage rates continue to climb too. Right now, rates are hovering around the 5.1% mark and may be even higher by year-end. Considering the price appreciation of homes in the state and increasing interest rates, is now still a good time for homeowners to take out a cash-out refinance to tap into their home equity?

Perhaps, especially if you have a lot of equity in your home and locked in at a much higher rate when you originally took out your mortgage. The funds obtained from a cash-out refinance can then be put to good use for things such as home renovation projects that can help put even more value into their homes.

It’s expected that cash-out refinances could slow down in Colorado through 2022 because of higher rates, but shoudl still be relatively active given the rise in home values and equity.

Here’s an updated look at cash-out refinancing and home-price trends in Colorado.

Cash-Out Refinancing in Colorado

A “cash-out refinance” program is a specific type of refinancing that involves taking out a bigger home loan compared to the loan amount on the first mortgage to convert any equity into cash. The difference between the new loan amount and what is still outstanding can be taken out in cash and be used for a number of purposes, such as home renovations, car repairs, college tuition, and so forth.

In Colorado, cash-out refinancing is becoming more and more common among homeowners who have had the opportunity to benefit from price appreciation over time. With an increase in property value comes more equity, as long as mortgage payments are being made on time and no additional loans have been taken out against the home.

With low interest rates for mortgages, cash-out refinancing is even more attractive. A cash-out refinance may provide you with a lower interest rate if you initially purchased your home when rates were higher.

Let’s illustrate how cash-out refinancing can work for you. Let’s say you currently have an outstanding balance of $200,000 on your mortgage, and your home is currently valued at $350,000. You may be able to refinance your current home loan for more than what you still owe ($200,000).

If you need $60,000 to use for a large expenditure, you may be able to take it from your home’s equity, if there’s enough to support this arrangement. You could then refinance your mortgage for $260,000 (the $200,000 you still owed on your original mortgage plus the $60,000 you want to cash out on).

Of course, this is a simplified explanation of how this could work. But there are some variations to this type of loan program that your seasoned mortgage specialist can explain to you.

Related: Cash Out Refinance After a New Purchase?

Live Colorado Mortgage Rates

Take Advantage of a Lower Interest Rate

As mentioned earlier, if you initially locked in at a much higher interest rate when you first took out your mortgage compared to today’s rate, you may be able to benefit from a cash-out refinance. Even a rate that’s 1% higher can make a huge difference.

Let’s illustrate. Based on a 3.65% interest rate, you would be paying $192,386 over the entire 30-year term of your mortgage. But if you add just 1% to the interest rate, you would be paying $254,016 in total interest over the mortgage term. That’s a difference of $61,630. That’s a lot of money that you can potentially save even with just a 1% decrease in your mortgage interest rate.

If your current mortgage rate is significantly higher than today’s interest rate, refinancing might be worth consideration. In fact, taking advantage of lower interest rates is one of the more popular reasons why homeowners in Colorado refinance, especially as price appreciation continues.

With higher property values of homes in Colorado , cash-out refinancing could still be an attractive option for homeowners in Colorado.

Related: Time The Market: When To Refinance And Lock A Rate

Is Cash-Out Refinancing Right For You?

Colorado homeowners can use the funds from a cash-out refinance for all sorts of reasons, such as:

  • Taking advantage of a lower interest rate to save thousands on interest over the life of their home loans
  • Shrinking the size of their mortgage payments
  • Shortening their home loan terms
  • Moving to a fixed-rate mortgage from an adjustable-rate mortgage
  • Converting some home equity into liquid funds (specifically for cash-out refinancing)

There are many reasons to consider a cash-out refinance in Colorado, but is it right for you? You’ll want to speak with an experienced mortgage specialist to help you make that decision.

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Have questions about cash-out refinancing?

If you’re wondering if cash-out refinancing is right for you or have other questions about other mortgage products, Sammamish Mortgage can help. We are a local mortgage firm based in Bellevue, Washington that serves the entire state, as well as the broader Pacific Northwest region. Our mortgage financing experts can work with you to determine if cash-out refinancing – or any of our other mortgage programs, including our Diamond Homebuyer Program – is right for you. Get in touch with us with any questions you have about refinance loans in Colorado.

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