Are you ready to refinance in the Golden State? Here is some vital information you may want to know before applying for financing.

California Refinance Stats

California has a population of 39.2 million (July 1, 2021), 14.5 million housing units (July 1, 2021), 13.1 million households (2016-2020), and a median value of owner-occupied housing units of $538,500 (2016-2020), (census.gov).

According to Bankrate data, as of July 26th 2022, the average rates in California were 5.680% APR for a 30-year fixed and 4.930% APR for a 15-year fixed. (These rates vary each day depending on the market, the borrower’s credit score, zip code, property value, among other factors, and may not be available today).

As of July 2022, California’s average 30-year fixed rate is 0.160% APR higher compared to the 5.520% APR national average rate for a 30-year fixed rate mortgage (Freddie Mac), making it more expensive on average to refinance in California compared to the US average.

Since rates in California have risen, especially since the low rates in 2020-2021, it’s now harder for the average person to qualify for a refinance. For many people it may not make sense to refinance if the current rate is higher than their loan’s, unless they need cash-out. Yet, getting a lower rate on a mortgage is not the only reason why one may want to refinance.

Refinancing is a way to get extra cash for the following reasons: paying off a different high-interest loan or debt (credit card, student loan, etc), improving their main property, funding a large expense such as a boat, vacation, wedding or divorce, and people even refinance to buy other properties or buildings.

Sources: https://www.freddiemac.com/pmms/pmms30, https://www.census.gov/quickfacts/CA

Top Reasons to Refinance

Maximum LTV for cash-out refinance

What is the maximum LTV on a conventional cash-out refinance?

The maximum loan-to-value ratio for a conventional cash-out refinance is often 80%. This means your LTV can be no higher than 80% if you want to qualify for cash-out refinancing with a conventional loan. Take a look at this sample calculation:

The homeowner in this example may qualify for a cash-out refinance for up to $95,000 in cash. Keep in mind you’ll need to meet other credit, income, and financial requirements to get your loan approved.

What is the maximum LTV on a VA cash-out refinance?

Veterans, active-duty military personnel, and surviving spouses with VA loans may qualify for VA cash-out refinancing with a 90% max loan-to-value ratio. Let’s look at the same sample homeowner as above with a 90% maximum LTV:

The VA homeowner in this example might be eligible to receive up to $122,500 in cash after refinancing – more than they could get with a conventional or FHA cash-out. Most VA homeowners will still need to pay a VA funding fee in addition to their closing costs when refinancing. And they will need to meet credit, income, and financial requirements to get their loan approved.