Is 2017 a Good Time to Refinance a Mortgage in California?

Is now a good time to refinance a home in California? Can I save money by refinancing my mortgage loan in 2017? These are common questions among homeowners considering a refi? Here’s a market update to help you decide if a California refinance could work to your advantage in 2017.

California Mortgage Refinance in 2017: The Math Is Changing

According to a May 24 report from the Mortgage Bankers Association (MBA), refinance loans accounted for 43.9% of total mortgage applications. That was an increase of 11% over the previous week’s refinancing share. This is not surprising, when you consider the mortgage rate trends that have occurred so far in 2017.

In short, increased home prices and lower mortgage rates have enabled more California homeowners to refinance their mortgage loans.

According to the latest industry survey from Freddie Mac, released earlier today, the average rate for a 30-year fixed mortgage dropped to 3.95% during the week of May 25, 2017 — the lowest point of the year. Thirty-year loan rates haven’t averaged that low since November of last year.

This trend could enable a larger number of homeowners to refinance their homes in California. Generally speaking, lower interest rates put homeowners in a better position to benefit from refinancing. This trend is one of several factors that have contributed to the recent uptick in mortgage refinance applications, as reported by the MBA.

Home Prices Have Risen in Recent Years

Rising home prices have also changed the mortgage refinancing equation for California homeowners in 2017. In May, the real estate data company Zillow reported that the state’s median home value had increased by 7.3% over the last 12 months. The annual gains were even larger in some cities, including Oakland (9.1%) and San Bernardino (8.1%).

Rising home prices boost equity for homeowners, which can make it easier to qualify for a mortgage refinance loan. All of these factors combined could lead to a higher number of California homeowners refinancing their homes in 2017 — especially if rates drop even further.

Related: Are California home prices cooling?

Does Refinancing Make Sense for You?

Right now, some California homeowners are in an excellent position to refinance their mortgage loans, while others are not. It begs the question: How can you determine when refinancing makes sense for you, given your current mortgage situation?

Fortunately, you can answer this question with some basic math.

If the money you save by lowering your monthly payments eventually exceeds the amount you pay in closing costs, refinance might make sense. The point at which your savings begin to surpass your costs is known as the break-even point. (This assumes that your primary reason for refinancing is to lower your payments and save money. That’s the most common reason for a refi.)

So you need to know two things, at a minimum:

• How much you’ll save each month, after refinancing your California mortgage.
• How much you’ll pay in closing costs on the new loan.

Divide the cost of the refi by the amount of money saved each month, and you’ll know how many months it will take to reach your break-even point.