Tapping Equity Without Giving Up a Low Mortgage Rate

As of May 2025, California’s housing market continues to present a mix of opportunity and challenge. High mortgage rates and persistent affordability concerns are reshaping buyer behavior and limiting refinance activity, but strong home equity positions have opened new doors for savvy homeowners—particularly those looking to access funds without losing their low-rate mortgage.

Market Conditions
California remains one of the most expensive housing markets in the country. Median home prices continue to rise, with San Jose now topping $2.02 million and San Diego at $1.04 million. While inventory for single-family homes is up nearly 20% year-over-year, it remains well below pre-pandemic levels, especially in coastal regions. This supply shortage keeps competition high and pricing firm.

Buyers are feeling the pinch. With the average 30-year fixed mortgage rate holding around 6.76%, the median monthly mortgage payment in California is now $2,868. First-time buyers in particular are finding it harder to qualify, and many are shifting their focus to more affordable inland areas or holding off altogether.

The Refinance Landscape
Refinance activity has slowed dramatically. Most homeowners have locked in lower rates from previous years, and with current refinance rates around 7.15%, there’s little incentive to give up a favorable loan. This “lock-in effect” has kept homeowners in place. However, when rates briefly dipped earlier this month, refinance applications rose by 11%, proving that some equity-rich borrowers are still watching for the right moment.

Home Equity: A Strategic Tool
While refinancing may not be attractive in today’s rate environment, many California homeowners are sitting on record levels of equity. At Independent Home Finance Inc., we help clients access this equity through second-lien solutions that leave their first mortgage untouched.

Tim Kyle, a mortgage expert with Independent Home Finance Inc., explains:

“Roughly 80% of homeowners in California are holding first mortgages under 5%. Giving that up just to access equity doesn’t make sense. That’s why we focus on second-lien options that allow homeowners to borrow without sacrificing their current rate.”

Second Mortgage Options
One of the most widely used tools is the Home Equity Loan. This is a fixed-rate second mortgage—typically with 30-year terms—that provides a lump sum for uses like debt consolidation, renovations, or large expenses. These loans have no prepayment penalty and are ideal for clients who want long-term stability. Qualifications generally include a 640+ credit score, 20–30% equity in the property, and a debt-to-income ratio under 43% (based on gross income).

For older homeowners, there’s a reverse-style second mortgage available to those 62 and up with at least 50% equity. These loans require no monthly payment, making them an excellent option for seniors who want to age in place while unlocking some of their home’s value. The first mortgage remains intact, so they keep their low rate and gain flexibility.

Another solution is the Home Equity Agreement, which is more flexible in qualification. These are designed for those recovering from recent financial hardship—credit scores as low as 500 can qualify, and mortgage lates or income challenges may be considered. While not intended for long-term use, this option can offer quick relief in emergency situations, providing time to stabilize and prepare for future financing.

Some clients also consider a HELOC, or Home Equity Line of Credit. This offers revolving access to funds but comes with a variable rate, which makes future payments unpredictable. Tim cautions clients to be careful with HELOCs:

“If you’re confident you can pay it off quickly, a HELOC might make sense. But I prefer fixed second mortgages. They give you a known payment and long-term safety.”

Planning for What’s Ahead
The Federal Reserve has not indicated an immediate plan to cut rates, though some market analysts anticipate modest relief later in 2025. Until then, affordability will remain a key concern across high-cost metro areas like Los Angeles, San Francisco, and Orange County. Builders are still facing regulatory hurdles and cost issues that limit new construction, which means inventory will likely stay tight.

For those looking to buy, inland markets may offer better value. But for existing homeowners, accessing equity through second mortgages or short-term bridge options could be the best way to unlock financial flexibility without surrendering a low-interest loan.

How Independent Home Finance Inc. Can Help
At Independent Home Finance Inc., we specialize in helping clients navigate this complex market. Whether you’re looking to consolidate high-interest debt, fund a remodel, cover emergency expenses, or simply create financial breathing room, our team is here to help you evaluate your options.

“Every homeowner’s situation is unique,” Tim adds. “We take the time to assess your goals and your equity position, and we help you find the most strategic and cost-effective way to get the funds you need.”

Ready to explore your equity options?
Contact Independent Home Finance Inc. today and discover how we can help you unlock the value in your home—without losing the low mortgage rate you already have.