Refinancing in California: Is It Still Worth It at 7% Rates?

California’s Market Dynamics

Refinancing at a 7% interest rate might seem counterintuitive. When most market rates hover near 7%, the immediate appeal wanes. Yet, in California’s unique real estate landscape—marked by high home values and significant equity gains—there remain compelling reasons why refinancing can still prove to be a strategic move. At LBC Mortgage, we help homeowners understand when and how refinancing makes sense, even at higher rates.

California continues to see strong property appreciation, especially in high-cost regions. Data from early 2025 reveals annual growth rates like 4.7% in Los Angeles, 3.2% in the Bay Area, and 6.3% in Sacramento. Meanwhile, inland areas like Riverside-San Bernardino reported 7.2% appreciation, reinforcing the equity homeowners have built.

High equity — often exceeding 20% — unlocks refinance benefits beyond lowering rates. In California, it’s common for homeowners to qualify for cash-out refinancing programs or eliminate Private Mortgage Insurance (PMI). At LBC Mortgage, we help clients unlock these opportunities to meet their financial goals.

When Refinancing at ~7% Can Still Pay Off

Cash-Out Refinancing for Strategic Use of Equity

If you’ve amassed substantial equity, a cash-out refinance at 7% could bring more value than its rate suggests. With California’s median home values nearing $1 million in metro regions, pulling even a small percentage out can unlock funds for home improvements, debt consolidation, or other needs.

In Q4 2024, homeowners drew more than $21 billion via cash-out refinancing, often to pay off higher-interest debt or fund repairs. Equity can outweigh concerns about borrowing at higher rates, especially when alternatives like credit cards charge 20% or more. LBC Mortgage guides clients through the cash-out refinance process, ensuring they get the best terms available.

Juggling Rate-and-Term Benefits

Rate-and-term refinancing lets you adjust your loan term without increasing principal. While California rates near 7% may limit immediate savings, they allow homeowners to change to shorter terms—moving from 30-year to 15-year mortgages—to build equity faster and slash total interest paid.

Refinancing makes sense if you plan to stay in your home long enough to break even—the point where cumulative interest saved exceeds closing costs. For example, saving $200 monthly against $4,000 in closing costs means a 20-month breakeven, a solid move for long-term residents. LBC Mortgage can help calculate your break-even point and recommend the right loan structure.

Key Factors to Determine if It’s Worth It

Rate Differential

A common rule is that refinancing makes financial sense only if you can shave at least 1% off your current rate. If you currently hold a 7% mortgage and can refinance at 6%, your savings become substantial.

Currently, average 30-year refinance rates in the U.S. hover around 7.09%. But the national average may not reflect regional lending offers. It’s possible to qualify for better terms at credit unions or online lenders. In California, some well-qualified borrowers see 6.7%–6.9% for 30-year fixed and as low as 6.3% for 15-year terms. LBC Mortgage has access to a wide network of lenders and can help you secure competitive rates.

Time Horizon and the Break-Even Point

Sticking power in your home matters. If you’re likely to stay beyond the break-even period—often under two years—you start gaining real savings. For shorter stays, consider quicker-break-even options like streamlined or no-close-cost refinances. These may carry higher rate environments but lower upfront investment. LBC Mortgage offers flexible refinance options that fit different timelines and financial situations.

Current Financial Picture and Loan Terms

Your credit profile plays a large role. Borrowers with scores above 720 often receive rates 0.3%–0.6% better than the general average. Lenders also weigh debt-to-income ratios, employment history, and loan-to-value (LTV) metrics. California’s jumbo-loan zones (e.g., L.A., Bay Area) bring their own rate nuances. At LBC Mortgage, we evaluate your full financial profile to match you with the best lender.

Costs and Risks to Factor In

Don’t ignore closing costs: they range between 2%–5%, and may include appraisals, origination fees, and title work. Loans may also come with prepayment penalties—typical for mortgages originated before 2014. These extra expenses reduce net savings.

In California, strict lending regulations and high insurance costs (due to wildfire and earthquake exposure) can also drive up refinance costs. LBC Mortgage ensures all these costs are transparent from the start.

Scenarios Where Refinancing at ~7% Is Advisable

You’re Currently Paying Over 7%

If your current rate exceeds 7%, even a small drop to 6.5%–7% yields monthly savings. A refinance from 7% to 6.5% on a $400,000 loan reduces payments by about $120/month. Over time, that adds up significantly. LBC Mortgage helps you analyze potential savings.

You Want to Remove PMI

Achieving 20% equity allows cancellation of PMI — a potential annual savings of thousands. Even when rate differences are narrow, removing PMI can tilt the cost-benefit in your favor. We help our clients identify when PMI removal makes financial sense.

You’re Shifting Loan Term or Type

Transitioning from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage provides stability and peace of mind amid rate volatility. Similarly, opting for a shorter term can accelerate equity gain and reduce interest expenses over time. LBC Mortgage can guide you through the pros and cons of these transitions.

You’re Tapping Home Equity Without Alternative Costs

Cash-out refinancing often offers better interest terms than credit cards or personal loans. If you plan to use equity for home upgrades, debt payoff, or investment opportunities, a refinance may be a strategic route. LBC Mortgage helps structure these loans to suit your objectives.

Why Choose LBC Mortgage for Your Refinance in California?

California presents both opportunity and complexity. When you refinance through LBC Mortgage, we deliver:

Local Expertise

We understand California regulations, insurance mandates, and regional markets. Whether you’re in San Diego or San Jose, we guide you with precision.

Customized Solutions

From rate-and-term refinancing to cash-out programs tailored to your goals, we personalize every step.

Transparent Cost Breakdown

We offer clear upfront estimates and breakeven projections, without hidden fees. Our honesty sets us apart.

Wide Lender Access

We give you access to competitive offers from banks, credit unions, and online lenders. More options mean better rates.

Streamlined Process

We handle paperwork, appraisals, and closings with efficiency. Our team keeps you updated every step of the way.