A year ago, house was appraised at $162k. I received an offer to refinance for $200k. If I take it and the bubble bursts, what will happen?

The biggest impact would be if the bubble burst and you decided to sell. Because you could very well end up upside down on your mortgage, owing more than your house is worth. If you plan to stay in your home for a long time, the impact will likely be minimal as long as the market recovers. You simply continue living in your home and paying the mortgage, then after the market recovers you can sell and not have a loss. Otherwise it’s just a paper loss without direct impact. 

You should take the offer, the bubble isn't going to burst with all the money printing going on.  

They are NOT going to refinance it for $200k when the appraisal comes back at $162k.  Do you think those companies are stupid?  How is it that they have billions of dollars of assets?  And what do you have?

So long as you keep paying the mortgage, nothing will happen.

Are you refinancing and taking the cash?  If yes, then you may owe more than the home is worth.

Then you owe a home that you pay $200k on the mortgage for.

If you continue to pay the mortgage and you are upside down, then you can't sell if you decide to unless you pay the outstanding amount or deal with the potential short sale consequences.

If you don't need to the $75,000 in cash to do something with like remodel, pay off business loans, or other long term economically beneficial debt, you don't take a cash-out refinance.

- paying your credit card or car loan are not economically beneficial debt. 

Nothing will happen as long as you can make the payments.

If you can't make the payments or want to sell, that's going to be a problem.

Why do you want to spend your house?    Use your paycheck to pay for the things you want to buy.

The price will drop and the variable interest will skyrocket and you'll be left with an unsupportable debt that will be impossible to pay off. Your loan will eventually go into default and the bank will seize the property.  Added costs including interest will incur adding to the total increasing debt.