Refinance Your Mortgage in California

For California homeowners, mortgage refinances are a strategic opportunity to improve financial well-being. As interest rates in the Golden State have dropped compared to record highs in previous years, many California homeowners are looking for new mortgage offers to reduce their monthly payments, consolidate debt, or tap into home equity.

As with any mortgage, comparing multiple mortgage companies is the key to finding the lowest refinance rates and lowest overall costs. As an independent, tech-oriented broker, we can save you time by finding mortgages with flexible terms, top rates, and low lender fees.

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Benefits of Refinancing in California

According to the California Association of Realtors, inflation may continue to decrease throughout 2024, which could motivate the Federal Reserve to relax its monetary policy [1]. While mortgage rates are still high compared to pre-pandemic years, they’ve steadily dropped from their record 8% average peak in October 2023. 

As mortgage rates continue to relax, more new homebuyers are entering the housing market, and existing homeowners are feeling encouraged to refinance.

In California, current interest rates for a 30-year fixed refinance are generally lower than the national average. In other words, now is an opportune time for California homeowners to secure lower mortgage rates and reduced monthly payments. 

Plus, when you lower your interest rate, you can pay off more of your principal with each monthly payment, helping you build home equity faster.

To determine whether refinancing is worth it for you and your home, try using the 1% rule. This rule states that your refinance interest rate should be at least 1% lower than your current rate for the financial move to make sense. If you obtained your current mortgage with a relatively low credit score, which has since improved, you may get better mortgage terms if you refinance.

Changing Your Loan Type

If you’re looking for predictability, you can switch from an adjustable-rate mortgage to a fixed-rate one and lock in a lower rate. If you don’t plan to stay in your home for very long or you plan to refinance multiple times, adjustable-rate mortgages with low introductory rates can help you cut down on your monthly expenses.

Changing Your Loan Term

Different refinancing options allow you to change your mortgage rate, but you can also change the duration or term of your loan. For example, you may choose to lengthen the term of your loan to reduce your monthly payment or shorten it to pay off your mortgage sooner.

Removing Private Mortgage Insurance

If you purchased your home through a conventional loan and put down less than 20% as a down payment, you may be able to remove private mortgage insurance (PMI) by refinancing. High home appreciation rates in California may help you achieve this faster than you thought, as you can calculate your new LTV (loan-to-value) ratio using your home’s new, higher value.

Accessing Home Equity

If you have significant expenses like medical bills or education costs, you can get a new, larger mortgage with a lower LTV ratio and cash out the difference. However, a cash-out refinance is not recommended unless you can get a more affordable interest rate on your new home loan.

Why Refinance in California with F5 Mortgage

Refinancing a mortgage with F5 Mortgage is an excellent move for California homeowners for many reasons.

  • We’re an independent broker — This means we work for you, not the lenders.
  • We help you find your lowest interest rate — Instead of shopping around yourself (which can take tons of time), we help streamline the process by dedicating our team to finding you the lowest California refinance rates possible.
  • Our dedicated team approach — When you work with F5 Mortgage, you get access to a loan officer and an account manager, plus our unparalleled customer service support.
  • We have over two dozen available lenders — With such a large network of lenders, we can get you the best possible terms and rates to fit your refinance needs.
  • Assistance throughout the entire refinancing process — When you refinance with F5 Mortgage, you’re never alone. Our team is dedicated to helping you at every step of the way.
  • Apply online, by phone, or by chat — We’re all about making the refinance process as easy as possible, and this includes making sure you can apply wherever and however you want.

How Does the Refinancing Process Work in California?

Refinancing a mortgage simply means replacing your current mortgage with a new one to reduce your payment or access equity. If you’ve done the math and found that a California refinance is in your best interest, there are a few steps you can take to secure new terms or tap into the equity of your home.

Step-by-Step Guide

Research Your Options

Once you’ve assessed your financial situation, you’ll need to research your refinance options. While refinancing your mortgage with your current lender is an option, you can also compare multiple lenders and loan options to find the best rates and terms.

Submit an Application

Next, you’ll need to submit a refinancing application with information about your property and other financial documents. After that, you will go through an appraisal process where the lender will assess your property’s current value.


The next step in getting a new California mortgage is underwriting. Here, the lender reviews your loan application, credit history, debt-to-income ratio, assets, and other requirements to complete the credit approval process.

Close on Your New Mortgage

Finally, once your application has been accepted, you can close the deal, sign the new documents, and pay closing costs. After the deal is done, your new lender will repay your original loan, and your monthly mortgage payments will be directed to your new lender.

Eligibility Requirements

Common mortgage qualification requirements for refinancing in California include:

  • A minimum credit score of 620 for conventional loan programs
  • A stable income and employment history
  • Sufficient equity in your home (often at least 20% for favorable mortgage rates; some lenders allow as little as 3%)
  • A debt-to-income ratio of 43% or less

California Refinance Loan Types

Refinancing options are offered on all mortgage types, from government loan programs such as FHA, VA, and USDA loans to conventional loans. Different refinance loan types address different borrower needs, such as changing the terms of your loan or accessing home equity.

  • California FHA Loans

Borrowers with FHA (Federal Housing Administration) loans can take out a cash-out refinance, an FHA simple refinance, or a streamlined refinance. In all cases, the borrower must already have a loan insured by the Federal Housing Administration.

A cash-out FHA refinance works similarly to cash-outs on conventional loans. This refinance type is ideal for people who want to access their home equity.

Simple refinances on FHA home loans work to change the mortgage rate, reduce your monthly mortgage payment, or change the term length. However, you cannot liquidate any of your home equity with a simple refinance. If the refinance results in over $500 in profit, the money is used to reduce your principal.

The third option, streamlined refinance, has a streamlined procedure, as it requires less documentation from the borrower, and it doesn’t require another FHA appraisal. These refinances can be credit-qualifying, meaning the lender will check your credit score and finances to determine if you qualify for better rates. 

They can also be non-credit qualifying, which would mean your personal finances would not be examined as closely. As with simple refinances, you cannot take money out with this refinance type.

  • California VA Loans

A Department of Veterans Affairs loan is typically used for purchasing a single-family home as a primary residence without needing a down payment. Once you’ve accrued some equity in your home, you can refinance a VA loan in two ways.

The first is through a VA Interest Rate Reduction Refinance Loan (IRRRL), which aims to reduce your rate and monthly payment. The second refinance type is a VA cash-out refinance, used for addressing various financial needs.

  • California Rate-and-Term Loans

Rate-and-term loans are the most popular among California refinance types. The aim of a rate-and-term refinance is to reduce your monthly mortgage payment by replacing your current mortgage with a new mortgage that has a better rate or different term length. For example, you can switch to a shorter term to pay off the mortgage faster.

California homeowners typically get these refinances in times of falling interest rates to save money on their total loan amount. They can also switch between a variable rate and a fixed-rate mortgage. 

  • Adjustable-Rate Mortgages

An adjustable-rate mortgage (ARM) has an introductory period with a lower mortgage rate, after which the rate is adjusted to market conditions on a regular basis, typically every six months. Since variable rates come with more unpredictability, interest adjustment caps help protect borrowers. 

Compared to fixed-rate mortgages, adjustable-rate mortgages typically have lower introductory rates, making them suitable for people who plan to pay off their mortgage fast, sell their home and move, or refinance again in a few years.

  • California Fixed-Rate Mortgages 

Fixed-rate mortgages typically have higher rates over the mortgage term, but they provide borrowers with predictability that helps them plan their finances, since your monthly payment stays the same. 

Homeowners tend to switch to a fixed-rate mortgage during more volatile periods. Fixed-rate home loans are also more suitable for people who plan to live in their home for the long term. If you plan to switch from an ARM to a fixed-rate mortgage, it’s important to check for a prepayment penalty in your contract.

  • California Cash-Out Refinance

A cash-out refinance in California involves refinancing an existing mortgage for a higher amount than what is currently owed. This allows homeowners to receive the difference in cash.

Mortgage companies offer cash-out refinances to homeowners who need access to their home equity to cover significant expenses like home renovations, debt consolidation, or large purchases.

Cash-out refinances can also be beneficial when the new interest rate is lower than the borrower’s current mortgage rate. Homeowners should also look into other ways to access their equity, such as home equity loans and a home equity line of credit. 

  • Cash-In Refinance Loans

As opposed to cash-out refinances, cash-in refinance loans involve refinancing while paying down a part of the principal. This option can yield a lower interest rate, reduced monthly payment, or remove PMI if the loan-to-value ratio improves significantly.

Homeowners choose this route when they have excess funds to invest in their home equity. The lump-sum payment provided at closing can also lower the number of payments left until you can repay in full. 

  • California Jumbo Loans

California’s home prices often require loan amounts that exceed the amounts set by Fannie Mae and Freddie Mac. And just as it’s more difficult to qualify for a jumbo loan, it’s also more difficult to refinance one. However, securing a lower interest rate on such a substantial amount helps you save thousands in the long run.

California mortgage rates for conforming and non-conforming home loans aren’t much different, and the same is true for refinance rates. Your refinance rate will primarily depend on your LTV and credit score. Finally, homeowners must take closing costs and their monthly payment into account, as these will be much greater given the sizable loan amount.

How Much Does It Cost to Refinance in California?

The cost of closing on a mortgage refinance in California generally varies from 2% to 5% of the loan amount. This is true for closing costs across the board, whether it’s a refinance or a new mortgage.

If your new loan amount is $300,000, for example, you can expect to pay between $6,000 and $15,000 in closing costs.

Here is a breakdown of the fees you can expect to pay when refinancing your home.

Fee Breakdown

Mortgage refinance closing costs are typically made up of the following fees:

  • Application fees – Between $75 and $500
  • Origination fees – Between 0.5% and 1.5% of the loan amount
  • Credit report fees – Around $35
  • Appraisal fees – Usually between $300 and $500, depending on location and property type
  • Title search and title insurance – Between 0.5% and 1% of the loan amount.
  • Discount points – 1% of the loan amount for a 0.25% interest rate reduction
  • Attorney fees – $500 or more
  • Survey fee – $150 to $400

How to Calculate Your Break-Even Point?

Calculating your break-even point can help you determine how long it will take to recoup the costs of refinancing through savings in monthly payments or interest rates.

To calculate your break-even point, follow these three steps:

  • Determine refinancing costs – This includes all closing fees and expenses associated with refinancing, including origination fees, appraisal costs, and any discount points.
  • Calculate your monthly savings – To do this, subtract your new monthly payment from your current monthly payment.
  • Divide your refinancing costs by your monthly savings – The final result will show you the number of months it will take to break even.

For example, if your refinancing costs are $4,000 and your monthly savings are $100, your break-even point would be 40 months ($4,000 / $100 = 40 months). For your refinance to make sense, you would need to stay in your home long enough to reach the break-even point.

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