California Homeowners Average $623,000 in Equity; Second Liens Are Surging; Why a Cash-Out Refi May Be the WRONG Move
California homeowners are sitting on an extraordinary amount of housing wealth.
According to Cotality’s latest Homeowner Equity Insights report, California homeowners with mortgages averaged approximately $623,000 in equity in the second quarter of 2026 — one of the highest levels in the country. Nationwide, homeowners with mortgages held $17.9 trillion in equity. Cotality
And there is another number that jumped out at me:
New HELOC and closed-end second-mortgage originations increased nearly 20% from
the first quarter to the second quarter. Cotality
That makes sense.
Millions of homeowners have a problem that did not exist a few years ago:
They have a lot of equity.
They need access to some of it.
But they really do not want to touch their first mortgage.
I. YOUR LOW FIRST MORTGAGE HAS VALUE
Suppose a homeowner owes $500,000 on a first mortgage with a very low interest rate.
Now they need $100,000.
Maybe it is for a remodel.
Maybe it is an ADU.
Maybe it is college.
Maybe it is debt consolidation.
Maybe they want cash available before purchasing another property.
The traditional answer used to be:
“Do a cash-out refinance.”
But a cash-out refinance replaces the entire existing first mortgage.
So the homeowner is not merely financing the $100,000 they need.
They are replacing and repricing the existing $500,000 too.
That can completely change the math.
The interest rate on the second lien may be higher than the old first mortgage.
But that does not automatically make the second lien more expensive overall.
You have to compare what happens to the ENTIRE debt structure.
II. A HELOC AND A HOME-EQUITY LOAN ARE NOT
THE SAME THING
People use these terms interchangeably.
They should not.
A HELOC is generally a revolving line of credit.
You may be approved for a certain limit but only pay interest based on what you
actually draw, subject to the terms of the line.
That can work well when someone needs flexibility.
Think:
A renovation completed in stages.
An emergency reserve.
An ADU project with expenses occurring over time.
Cash available for a future opportunity.
A home-equity loan — sometimes called a HELOAN or closed-end second — works
more like a traditional installment loan.
You receive a set amount.
The payment is generally fixed when structured with a fixed interest rate.
That may make more sense when the homeowner knows exactly how much money is
needed and wants predictable payments.
Neither is automatically better.
They solve different problems.
III. SECOND-LIEN BORROWING IS ALREADY
SURGING
This is not some obscure financing strategy.
Cotality reported that new closed-end second mortgages and HELOC originations
increased from $78.2 billion in the first quarter of 2026 to $93.7 billion in the
second quarter.
That is a 19.8% quarter-over-quarter increase. Cotality
ICE has reported something similar.
Earlier this year, second-lien borrowing reached its strongest first-quarter volume in
nearly two decades, with many borrowers specifically choosing second liens so they
could preserve their existing first-mortgage rates. Intercontinental Exchange
That is the important part.
Homeowners are not necessarily borrowing because they are desperate.
Many are simply realizing:
“My house has equity, but my existing mortgage is valuable too.”
Those two things can coexist.
IV. CALIFORNIA HOMEOWNERS HAVE EVEN MORE AT
STAKE
The national numbers are huge.
California’s are even more interesting.
Cotality estimates the average California homeowner with a mortgage has
approximately $623,000 in equity. Cotality
Obviously that does not mean every homeowner has $623,000 available to borrow.
Loan-to-value limits matter.
Credit matters.
Income matters.
Property type matters.
The existing first mortgage matters.
And nobody should borrow money just because equity exists.
But it does mean many California homeowners have options they may not realize they
have.
This is especially true for longtime owners in the Bay Area, Orange County and other
high-cost California markets.
Someone may be sitting on hundreds of thousands — or even more — in equity while
still keeping a first mortgage they obtained years ago.
That is precisely the borrower who should compare structures before refinancing
everything.
V. THE REAL QUESTION IS: WHAT ARE YOU
TRYING TO ACCOMPLISH?
I do not start these conversations with:
“Do you want a HELOC?”
I start with:
What do you need the money for?
How much do you actually need?
Do you need all of it today?
How long do you expect to carry the balance?
What is the rate and balance on your current first mortgage?
What will the new combined monthly payment look like?
Is the purpose of the money likely to improve the property, reduce other debt, create
liquidity or solve another financial problem?
Then we can compare:
Keep the first mortgage + HELOC.
Keep the first mortgage + fixed second.
Cash-out refinance.
Or do nothing.
Sometimes the cash-out refinance still wins.
But it should win because the math says so.
Not because it was the first loan someone offered.
THE BOTTOM LINE
California homeowners are sitting on enormous amounts of equity.
Cotality estimates average homeowner equity in California at roughly $623,000, while
second-lien borrowing is rising quickly nationwide. Cotality
That combination tells me homeowners are beginning to think differently about their
mortgages.
Your first mortgage and your home equity are two separate financial assets.
You do not necessarily have to destroy one to access the other.
So before refinancing a low-rate first mortgage just to pull out cash, run the side-by-side
comparison.
Look at:
The amount you need.
The first mortgage you already have.
The new payment.
The interest structure.
The length of time you expect to carry the debt.
And the purpose of the money.
Because sometimes the smartest mortgage move is not replacing your mortgage at all.
It is leaving the first one exactly where it is.
About Michael Belfor
Michael Belfor is a Branch Manager and Loan Originator with approximately 24 years of
mortgage experience.
He has been recognized in American Pacific Mortgage’s President’s Club and among the company’s Top 1% producers since 2017.
Michael works with homebuyers, homeowners, real estate investors and real estate professionals on conventional, jumbo, FHA, VA, down-payment assistance, self-employed and Non-QM financing, DSCR/investment loans, TICs, condos, renovation financing, HELOCs, home-equity loans, bridge financing and other complex mortgage scenarios.
California Homeowners Average $623K in Equity — HELOC vs Cash-Out Refinance
California homeowners average roughly $623,000 in equity. Learn why a HELOC or fixed second mortgage may make more sense than replacing a low-rate first mortgage with a cash-out refinance.
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