Looking to refinance your home mortgage in California? This will help you know your options, including rate comparisons, key savings advice, and tips to lock in the best terms. Whether you’re aiming to lower payments or tap into home equity, you’ll find the info you need to make the best decision.
Updated: February 26, 2025
MFP’s Takeaways:
- Refinancing can serve multiple financial goals, from lowering monthly payments to accessing home equity.
- California homeowners face unique factors like high property values and Proposition 13 tax rules.
- Understanding the complete refinancing process helps avoid common and costly mistakes.
California’s Mortgage and Housing Market Trends
California’s housing market in early 2025 shows significant regional differences. Property values continue to appreciate, though at varying rates:
- Los Angeles County: 4.7% annual appreciation, with median home prices reaching $915,000
- San Francisco Bay Area: 3.2% appreciation, with median prices stabilizing around $1.35 million
- San Diego County: 5.1% growth, with median prices at $875,000
- Sacramento region: 6.3% appreciation, with median prices at $525,000
The inland markets, including Riverside and San Bernardino counties, offer more affordable options with median prices around $580,000 and higher appreciation rates of 7.2%.
Interest rates for 30-year fixed mortgages in California currently average 5.8%, with considerable lender competition creating opportunities for well-qualified borrowers to secure more favorable terms.
Refinancing Options
Mortgage refinancing replaces your current home loan with a new one, typically with different terms. When you refinance, your new lender pays off your existing mortgage, and you begin making payments on the new loan.
Different types of mortgage refinancing include:
- Rate-and-term Refinance: Changes your interest rate, loan duration, or both without changing the loan amount.
- Cash-out Refinance: Borrows against home equity, resulting in a larger loan balance but providing funds for other purposes.
- Cash-in Refinance: Adds money to reduce the loan balance, potentially securing better terms.
- FHA Streamline Refinance: Offers simplified refinancing for FHA loan holders with limited documentation.
- VA Interest Rate Reduction Refinance Loan (IRRRL): Provides streamlined refinancing options for VA loan holders.
- Jumbo Loan Refinance: Applies to loans exceeding conforming loan limits, common in high-value California markets.
Main Reasons to Refinance in California
California homeowners refinance their mortgages for several reasons:
Lower interest rates
Can decrease overall loan costs. Even a 0.5% rate reduction can save thousands over the life of a loan on high-value California properties.
Reduced monthly payments
Improve cash flow, creating room in monthly budgets for other expenses or savings.
Shorter loan terms
Such as moving from a 30-year to a 15-year mortgage, building equity faster and saving on total interest, though monthly payments may increase.
Switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage
Provides payment stability when interest rates are expected to rise.
Accessing home equity
through cash-out refinancing allows funds for home improvements, debt consolidation, or other financial needs.
Removing private mortgage insurance (PMI)
Becomes possible once you reach 20% equity, saving hundreds annually.
California Factors for Refinancing
Before refinancing in California, homeowners should know:
- High property values and loan limits often require jumbo loans, which have different qualification standards and rates.
- Proposition 13 tax implications limit property tax increases, but refinancing itself doesn’t trigger reassessment.
- California anti-predatory lending laws protect borrowers from high-cost loans with excessive fees or unfavorable terms.
- Climate and disaster risk factors like wildfires and earthquakes affect home insurance requirements and costs, potentially impacting loan approval if there’s not enough insurance on the home.
- State and local refinance assistance programs offer help to qualified homeowners, including the Keep Your Home California program and local initiatives.
California Refinance Rates – March 2025
| Credit Score |
Satisfaction |
|||
|---|---|---|---|---|
| 720 – 850 | 690 – 719 | 620 – 689 | ||
| California | 6.7% | 7.6% | 7.0% | |
| Credit Unions | 6.3% | 7.5% | 8.0% | 8.9/10 |
| Online lenders | 6.3% | 7.7% | 8.1% | 8.6/10 |
| Banks | 6.5% | 7.7% | 8.3% | 7.4/10 |
| 30 year fixed rate | 6.3% | 6.6% | 7.8% | |
| 20 year fixed rate | 6.1% | 6.2% | 8.1% | |
| 10 year fixed rate | 5.6% | 5.7% | 7.2% | |
| 7 year ARM | 6.4% | 6.5% | 8.4% | |
| 5 year ARM | 6.5% | 6.6% | 8.3% | |
| 3 year ARM | n/a % | n/a % | n/a % | |
| 30 year fixed rate FHA | 7.3% | 7.4% | 7.7% | |
| 30 year fixed rate Jumbo | 7.0% | 7.2% | 7.8% | |
| Satisfaction | 8.6/10 | 8.2/10 | 7.4/10 |
Source: MFP’s Community Home Refinance Rates Survey of 2,399 members in the last 30 days.
Step-by-Step Guide to Refinancing in California
Step 1: Determine Your Goal
Identify why you want to refinance—lowering your rate, changing loan type, or accessing equity will guide your refinance goal.
Step 2: Check Your Credit Score
Your credit score affects your refinance rate. Before applying, review your credit report, fix errors, and take steps to improve your score if needed.
Step 3: Calculate Home Equity and Loan-to-Value (LTV) Ratio
Determine your LTV ratio by dividing your current loan balance by your home’s value. Most lenders prefer an LTV ratio below 80%.
Step 4: Compare Lenders and Loan Options
Research rates and terms from banks, credit unions, and mortgage brokers. Online lenders often offer competitive rates for California properties. Use our Refinance Comparison Calculator to see which refinance options is best.
Step 5: Gather Required Documents
Collect proof of income (pay stubs, tax returns), property details, and information about your existing mortgage.
Step 6: Get a Loan Estimate and Understand the Fees
Request Loan Estimates from multiple lenders, which outline all costs associated with the refinance.
Step 7: Lock in Your Rate and Submit Your Application
Once you select a lender, lock in your interest rate to protect against market changes during application processing.
Step 8: Undergo Home Appraisal and Loan Processing
The lender will assess your home’s value through an appraisal and verify all application information.
Step 9: Close on the New Loan
Review and sign final paperwork, pay closing costs, and complete the refinance process.
Costs and Fees Associated with Refinancing
Refinancing involves several expenses:
Closing costs
Typically range from 2-5% of the loan amount and include:
- Loan origination fees
- Appraisal fees
- Title insurance
- Credit report fees
- Recording fees
Prepayment penalties
May apply if your current mortgage has early payoff restrictions.
Break-even point calculation
Helps determine when refinancing makes financial sense. Divide total closing costs by monthly savings to find how many months until you recoup costs.
No-closing-cost refinance options
Build fees into the loan amount or interest rate. This reduces upfront costs but increases either the loan balance or the rate.
California Homeowners Who Refinanced – Examples
Example 1: First-Time Homeowner Refinancing to Lower Monthly Payments
Sarah, a Los Angeles tech professional, purchased a condo for 650,000 with a 30-year fixed-rate mortgage at 7.1%.
Original Loan:
- Loan amount: $520,000 (after 20% down payment)
- Interest rate: 7.1% (30-year fixed)
- Monthly payment (principal and interest): $3,500
- Total interest over loan term: $739,945
Refinanced Loan:
- Remaining balance: $505,000
- New interest rate: 6.3% (30-year fixed)
- New monthly payment: $3,122
- Monthly savings: $378
- Closing costs: $8,500
- Break-even point: 22.5 months (8,500 ÷ 378)
- Total interest over new loan term: $618,699
- Total interest savings: $121,246
Sarah will recoup her closing costs in less than two years and save over 121,000 in interest over the life of the loan.
Example 2: A Growing Family Using Cash-Out Refinance for Home Renovations
Michael and Jennifer, a Bay Area couple, owned a home valued at 1.2 million with 750,000 remaining on their mortgage.
Original Loan:
- Current balance: $750,000
- Interest rate: 6.5% (30-year fixed)
- Monthly payment: $4,741
- Remaining term: 25 years
- Home value: $1.2 million
- Current equity: $450,000 (37.5%)
Cash-Out Refinance:
- New loan amount: $900,000 (750,000 balance + 150,000 cash-out)
- New interest rate: 6.7% (30-year fixed)
- New monthly payment: $5,800
- New term: 30 years
- Closing costs: $13,500
- Post-renovation home value: $1.4 million (estimated)
- New equity: $500,000 (35.7%)
Though their monthly payment increased by $1,059, the renovations increased their home’s value by $200,000, resulting in a net equity gain of $50,000 ($200,000 value increase minus $150,000 borrowed).
Example 3: Long-Time Homeowner Refinancing to a 15-Year Loan Before Retirement
Robert and Linda, empty nesters in San Diego, had 18 years left on their mortgage with a $400,000 balance.
Original Loan:
- Current balance: $400,000
- Interest rate: 6.8% (30-year fixed)
- Monthly payment: $2,605
- Remaining term: 18 years
- Total remaining interest: $220,680
Refinanced Loan:
- New loan amount: $400,000
- New interest rate: 5.9% (15-year fixed)
- New monthly payment: $3,342
- New term: 15 years
- Monthly payment increase: $737
- Closing costs: $9,200
- Total interest over new loan term: $201,530
- Interest savings: $19,150
- Time saved on mortgage: 3 years
Their monthly payment increased by $737, but they’ll save $19,150 in interest and be mortgage-free three years sooner, aligning with their retirement plans.
Example 4: Investor Refinancing a Rental Property for Better Cash Flow
David, a Sacramento investor, owned a rental property worth $480,000 with a remaining mortgage balance of $350,000.
Original Loan:
- Current balance: $350,000
- Interest rate: 7% (30-year fixed)
- Monthly payment: $2,328
- Monthly rental income: $2,900
- Monthly cash flow: $572 ($2,900 – $2,328)
- Remaining term: 25 years
Refinanced Loan:
- New loan amount: $350,000
- New interest rate: 6.1% (30-year fixed)
- New monthly payment: $2,120
- New monthly cash flow: $780 ($2,900 – $2,120)
- Cash flow improvement: $208 per month
- Closing costs: $7,500
- Break-even point: 36 months ($7,500 ÷ $208)
- Annual return on closing costs: 33.3% ($208 × 12 ÷ $7,500)
The refinance increased David’s monthly cash flow by $208, providing a 33.3% annual return on the closing costs and improving the property’s overall investment performance.
Potential Risks and Downsides of Refinancing
Refinancing carries potential risks:
- Extending the loan term resets your amortization schedule and may result in paying more interest over time, despite lower monthly payments.
- Higher monthly payments can result when switching to a shorter loan term, potentially straining your budget.
- Property tax obligations generally remain stable under Proposition 13, but certain situations can trigger reassessment.
- Resetting loan amortization means early payments go primarily toward interest rather than principal, potentially slowing equity building.
- Home value fluctuations affect refinance eligibility and terms, particularly in California’s volatile real estate market.
Mortgage Refinance for Different Homeowner Situations
First-time homeowners
New homeowners should wait until they’ve built sufficient equity and can secure terms that create meaningful savings, unless the rate decrease is big enough for the savings to offset the cost.
Mid-stage homeowners
Homeowners who have paid their mortgage for 5-15 years can use refinancing to optimize their loan structure or access equity for major expenses.
Near-retirement homeowners
Older homeowners should consider shorter terms to ensure they enter retirement mortgage-free or leverage equity through cash-out refinancing.
Real estate investors
Investors can use refinancing to improve cash flow, fund additional property purchases, or consolidate loans across multiple properties.
Common Refinancing Mistakes and How to Avoid Them
Many California homeowners make these refinancing errors:
- Not shopping around for the best rates limits potential savings. Get quotes from at least three lenders to compare options.
- Overlooking hidden fees and costs can make refinancing more expensive than expected. Review the Loan Estimate carefully.
- Ignoring credit score improvement opportunities before applying can cost thousands in interest. Take time to boost your score.
- Failing to calculate the break-even point may lead to refinancing that doesn’t make financial sense. Run the numbers before proceeding.
- Taking cash out for non-essential expenses increases debt and financial risk. Use home equity for value-adding purposes.
FAQs About California Mortgage Refinancing
How often can I refinance my mortgage in California?
There’s no legal limit, but lenders may require a waiting period of 6-12 months between refinances.
What credit score is needed for the best refinance rates?
Most lenders offer their best rates to borrowers with scores above 740, though refinancing is possible with scores as low as 620.
Does refinancing affect property taxes in California?
Under Proposition 13, refinancing alone doesn’t trigger property tax reassessment.
What’s the difference between a refinance and a home equity loan?
Refinancing replaces your entire mortgage, while a home equity loan or Home Equity Line of Credit (HELOC) adds a second loan against your equity.
How long does the refinance process take?
In California, refinancing typically takes 30-45 days from application to closing.
End Note
Mortgage refinancing gives California homeowners opportunities to save money, access equity, or adjust loan terms to better match financial goals. When you know the process, costs, and factors specific to California, you can make better decisions about whether refinancing makes sense for your situation.
Before refinancing, look at your financial goals, compare offers from multiple lenders, and calculate your break-even point. Think to consult with a financial advisor to understand how refinancing fits into your overall financial plan.