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Cash-Out Refinancing in Washington State: A Rising Trend?

With house values rising steadily across the state of Washington, 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 a recent forecast suggests that even more homeowners could use cash-out refinance loans in 2018.

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.

Related: Will low rates help homeowners refi?

More Homeowners Expected to Tap Their Equity in 2018

In September 2017, Freddie Mac published an updated outlook for the U.S. housing market, mortgage industry, and the broader economy. Among other things, they offered three specific predictions for the mortgage industry.

One of their predictions was that a higher number of homeowners in Washington and nationwide would use cash-out refinancing to convert some of their equity into cash. This prediction stems from the fact that home prices have risen steadily over the last couple of years.

House values in Washington, in particular, have risen significantly in recent years. According to Zillow, the statewide median home price rose by 11% over the last year alone (as of November 2017). So we could see a higher number of Washington State homeowners using cash-out refinance loans in 2018.

According to the Freddie Mac report mentioned above:

“Homeowner equity [nationwide] has increased to $13.7 trillion in the first quarter of 2017. As home prices keep rising, cash-out activity is likely to also rise.”

Last year, it was reported that house values in Washington were rising faster than any other state in the country. As a result, homeowners across the state are enjoying higher levels of equity — or ownership — in their homes.

While house prices are expected to slow down over the coming months, experts agree that they will almost certainly continue rising throughout 2018. Additionally, mortgage rates are expected to rise gradually over the coming months.

According to Freddie Mac: “If mortgage rates rise or remain flat, 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.

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