Summary: Is now a good time for a cash-out refinance for you? And is this a trend that is expected to continue in Washington state and across the country in 2020?
With house values rising steadily across the state of Washington – with the exception of Seattle – homeowners are finding themselves with more equity in their homes. Many of them are using cash-out refinancing to convert some of that equity into cash. And it’s expected that the recent trend in rising cash-out refinances that we’ve seen in 2018 and 2019 will continue as mortgage interest rates continue to fall in 2020.
Here’s an updated look at the cash-out refinance process in Washington State, along with home-price trends.
Cash-Out Refinance Loans in Washington
As you might have guessed, “cash-out refinancing” is when homeowners refinance an existing mortgage loan for more than they currently owe. They would then receive the difference in cash. This is a popular strategy among Washington homeowners who have experienced equity growth.
An example: Let’s assume that a homeowner owes $90,000 on a house that is worth $250,000. In this scenario, the homeowner could potentially refinance the existing mortgage loan for more than the amount owed. Assuming they wanted to receive $50,000 in cash, they could refinance for $140,000 (the $90,000 outstanding loan balance, plus the $50,000 they wish to receive in cash).
There are variations to the cash-out refinance loan in Washington State. But that’s usually how it works.
Taking Advantage of Lower Interest Rates
Lower mortgage rates could make this a great time to refinance your mortgage loan to get access to cash from your home’s equity. If you locked in at a rate that’s at least 2% higher than what it is today, it may be worth considering a cash-out refinance. In fact, a lower interest rate is one of the best reasons to consider a refinance.
If you are considering using the funds you access from your home’s equity for a noble purpose, then a cash-out-refinance may be a good idea. For example, using the money to make improvements to your home that will add value is one of the best things you can do with that money while taking advantage of today’s lower mortgage rates.
House values in Washington, in particular, have risen significantly in recent years. According to Zillow, the statewide median home price rose by 4.3% over the last year alone (as of January 2020). So we could see a higher number of Washington State homeowners using cash-out refinance loans in 2020.
Homeowners who have a home loan experienced an equity increase over the past year, according to CoreLogic’s Home Equity Report. With higher home values in Washington state,homeowners across the state are enjoying higher levels of equity — or ownership — in their homes.
House prices are expected to continue at a relatively similar pace over the coming months compared to 2019. Additionally, mortgage rates are expected to remain stable over the coming months. And if rates continue to stay low or even dip even further, cash-out refinance activity will become an increasingly large share of total refinance activity.
Is Refinancing Right for You?
Homeowners in Washington State use refinancing for different reasons:
- Some do it to secure a lower interest rate on the new loan, thereby reducing the size of their monthly mortgage payments.
- Some do it to shorten the term of the loan, or to switch from an adjustable to a fixed-rate mortgage.
- And then there are those who use cash-out refinancing to convert a portion of their equity into cash.
Which begs the question: Is refinancing right for you? Will it help you accomplish your financial goals?
We can help you answer these important questions. Our mortgage financing experts can review your current equity and mortgage balance to determine if cash-out refinancing is right for you. Please contact our staff with any questions you have about refinance loans in Washington.
Are You Ready to Refinance Your Mortgage?
Is a cash-out refinance something that you may be interested in 2020? If so, Sammamish Mortgage can help. We are a local, family-owned mortgage company based in Bellevue, Washington and serve the entire state, as well as the broader Pacific Northwest region in OR CO, and ID. Please contact us if you have mortgage-related questions.