What Are the Different Types of Home Equity Loans in Washington?

Homeowners in Washington who have built up equity in their homes can convert some of that equity into cash, which could be used for a variety of purposes.

The key is to choose the right type of home equity loan based on your specific financing goals. As a homeowner, you actually have several options to choose from.

Summary: This guide explains the different types of home equity loans in WA, with their key features and pros and cons.

Home Equity Loans: A Powerful Financing Tool

The median home value for the state of Washington has risen by around 46% over the past five years (as of January 2025). Because of this, homeowners who have owned their homes for a few years might be in a good position to use an equity loan.

Home equity loans in Washington allow homeowners to borrow against their current equity, using the property as collateral for either a lump sum payment or a line of credit.

“Equity” is the difference between your home’s current market value and the amount you still owe on your mortgage. For example, if your house is worth $400,000 and you still owe $250,000 on your mortgage, your home equity would be $150,000 ($400,000 – $250,000).

Three Options Available for Washington Homeowners

As a homeowner, you have three main options for converting your home’s equity into cash. And while they all accomplish the same thing (tapping into equity), they work in very different ways.

1. Traditional Home Equity Loan

The standard home equity loan in WA is a fixed-term loan that allows homeowners to borrow a lump sum of money using their built-up equity as collateral. They usually have a fixed interest rate and are repaid in regular installments, similar to a purchase mortgage.

This option is popular among homeowners in Washington due to the predictability it provides. With a traditional home equity loan, the monthly payments remain the same throughout the term. The term itself can range from 5 to 30 years.

These types of home equity loans in WA are ideal for homeowners who need a specific amount of money for a one-time expense and prefer the stability of fixed monthly payments.

Eligibility Requirements

Eligibility for a home equity loan typically involves a few key factors that lenders evaluate to determine your ability to repay the loan and your property’s value. Here are the main eligibility requirements:

• Homeownership: To be eligible for a home equity loan, the property you’re using as collateral must be your primary residence, a second home, or an investment property. Lenders typically prefer that the property is your primary residence for security reasons.
• Equity in the Home: Home equity loans are based on the amount of equity you have in your home. Equity is the difference between your home’s current market value and the outstanding balance on your mortgage. The more equity you have, the higher the loan amount you may be eligible for. Lenders typically require at least 20% equity in the home.
• Credit Score: Lenders generally require a credit score of at least 620 for a home equity loan, although higher scores (around 700 or above) may increase your chances of approval and potentially secure better loan terms. A higher credit score demonstrates your ability to repay debt. Keep in mind that the exact credit score requirement may vary depending on the lender and the loan amount.

2. Home Equity Line of Credit (HELOC)

A home equity line of credit in WA, or HELOC, is a revolving line of credit secured by a home’s equity. The HELOC allows homeowners to borrow as needed up to a certain limit, similar to how a credit card works.

So, what is the difference between a home equity loan vs a HELOC? Unlike the home equity loan mentioned previously, HELOCs usually have variable interest rates that can fluctuate over time based on market conditions.

This type of loan is suitable for ongoing projects or expenses where you need flexibility in borrowing. You can withdraw funds, repay them, and borrow again during the “draw period,” which typically lasts 10 years.

After the draw period, you enter the “repayment period.” This is when you have to repay the outstanding balance.

The main benefit of using a HELOC in Washington State comes down to flexibility. You can borrow only what you need, when you need it. This makes it ideal for ongoing projects or expenses with uncertain costs.

HELOCs are ideal for Washington homeowners who need access to funds over time for ongoing projects, renovations, etc. But you have to be comfortable with fluctuating payments.

3. Cash-Out Refinance

Last but not least, we have the cash-out refinance, another way to convert equity into cash.

As the name suggests, cash-out refinancing allows homeowners to replace an existing mortgage with a new, larger loan—receiving the difference in cash.

This option allows Washington homeowners to accomplish multiple goals with a single transaction. For example, a borrower could receive a large lump sum of money while also lowering their interest rate or switching from an ARM to a fixed mortgage.

Cash-out refinancing in Washington is well suited for homeowners who need a large sum of cash, want to take advantage of lower interest rates, or want to change the terms of their existing mortgage.

How to Choose the Right Option

As with all financial products, homeowners can narrow down their options by asking a series of questions. Here are some questions you can ask yourself when choosing a type of equity loan.

We’ve covered a lot of information here, but there’s still more to learn. We encourage homeowners to research further into the different types of home equity loans in WA that are available, in order to make an informed choice.

Need Financing?

If you’re looking to buy in Washington, we can help. At Sammamish Mortgage, we offer various mortgage options for you to choose from. Visit our website to get an instant rate quote and see what current home equity loan rates in Washington are today. Or, call us today to have your mortgage questions answered!