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A new report showed that home equity loans and home equity lines of credit, or HELOCs, have become more popular in Washington State and across the U.S.
More and more homeowners have turned to equity loans and HELOCs as a way to tap into their home equity. The rise in mortgage rates we’ve seen since the start of 2023 has influenced this shift.
In August, the Urban Institute’s Housing Finance Policy Center published its latest “Housing Finance at a Glance” report. This monthly report offers insight into a variety of mortgage lending and home financing trends.
The group’s latest report showed a steep increase in the use of home equity lines of credit (HELOCs) in Washington State and nationwide. The use of “regular” equity loans has also risen in recent months, according to the report.
During the three-month period from January to May of 2022, the combined volume of both home-equity lines of credit (HELOCs) and traditional equity loans rose by 47%. That’s when compared to the same three-month period last year.
Clearly, these financing options have become more popular among Washington homeowners. We’ll look at the reasons why in just a moment. But first, for those who aren’t familiar with the subject, here’s a quick rundown on home equity loans and HELOCs.
The terminology in use here can be confusing, especially for those who have never used equity-based financing in the past. There are two similar products with similar-sounding names, but they work differently.
For many homeowners across Washington State, home equity loans and HELOCs have become more attractive than the cash-out refinance loan. That’s because mortgage rates have risen over the past year. Homeowners with existing mortgage rates that are lower than current market rates often shy away from refinancing, even when it’s a cash-out refi.
During the second week of February 2024, the average rate for a 30-year fixed mortgage was hovering around 5.875%. That’s lower than last year, when 30-year mortgages held an average rate of 6.5%.
For some homeowners, the cash-out refinance loan might not be the best way to tap equity in 2024 That could be why we are seeing a rise in the number of home equity loans and lines of credit being originated across Washington, and elsewhere in the U.S.
Many homeowners in Washington are now able to convert some of their equity into cash. In fact, the number of homeowners who could benefit from equity-based financing has risen sharply over the past few years. The reason — price growth.
According to Zillow, the median home value for Washington State rose in Winter of 2024 to $562,290, an increase of 0.8% year or year.
As a result, many homeowners in the state currently have a lot more equity than they did a few years ago. And that equity could be used for a wide variety of purposes.
Some homeowners use home equity loans and HELOCs to pay off high-interest debt, to cover the cost of college tuition, or to fund a renovation project.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.