Cash-out refinance in California

An owner who has held a California house for a long time carries two numbers that have nothing to do with each other: an assessed value anchored near the year they bought, and a market value far above it. The gap is the equity a cash-out refinance is for, and it is also why many owners will not go near one. The fear is that touching the property wakes the assessor up. The trigger is written into the state constitution, so the fear is checkable rather than a matter of who is telling you.

What re-prices a California house, and what does not

Article XIII A of the state constitution, the amendment everyone calls Proposition 13, works on a base rather than on a market value. That base climbs by no more than 2% (California Constitution, Article XIII A, Section 2(b) (Proposition 13), read 25 August 2026) a year whatever happens around it. The ad valorem ceiling applied to it is 1% (California Constitution, Article XIII A, Section 1(a) (Proposition 13), read 25 August 2026) of assessed value, with voter-approved bonded debt levied on top, which is why the state average lands at 1.152% (California State Board of Equalization, Open Data Portal, Summaries of Assessed Values by Property Class (Table 4), read 25 August 2026) of assessed value instead.

What resets the base is a short and specific list: the property is purchased, it is newly constructed, or it changes ownership. Every entry is an event in the chain of title, and borrowing is not one of them. A deed of trust is a lien recorded against a property, not a transfer of one.

The sourced evidence that the trigger turns on ownership rather than on paperwork is what happens when an owner deeds a rental into a limited liability company they themselves own: Exempt from the documentary transfer tax under Revenue and Taxation Code section 11925(d), which excuses a transfer between an individual and a legal entity that results solely in a change in the method of holding title and in which proportional ownership interests remain the same immediately after the transfer. Section 62(a)(2) keeps the same transfer out of Proposition 13 change of ownership, so the assessed value does not reset either. (California Revenue and Taxation Code section 11925(d), read 25 August 2026) A real deed is drawn, signed and recorded, and the base still does not move, because afterwards the same people hold the same proportional interests in the same property. A refinance does less than that, and moves no ownership interest whatsoever.

A constitutional trigger is not a personal assurance, and this page will not pretend otherwise. Nothing behind it rules on an individual file or on how a county assessor handles one, and a refinance folded into something larger is a different question: a name added to title, a co-owner bought out, a trust unwound. Each of those is a change-in-ownership question of its own, to put to the assessor before signing.

The taxes that frighten owners are charged on moving title

The figures that keep owners away from their own equity are mostly city conveyance taxes, and they look alarming for good reason. Inside one county they run From $8.50 per $1,000 in Hayward to $25.00 per $1,000 in Berkeley above $1,600,000 and in Oakland above $5,000,000, charged on top of the county tax. (Alameda County Clerk-Recorder Fee Schedule, effective 1 January 2024, read 25 August 2026) In the city of Los Angeles the schedule reads A base rate of $2.25 per $500, which is 0.45 percent, plus a Measure ULA rate of 4 percent above $5,400,000 and 5.5 percent at $10,900,000 or more. (Los Angeles Office of Finance, read 25 August 2026)

Every one of those is levied on a transfer of real property. A cash-out refinance transfers nothing: no grantor, no grantee, no consideration, and so no base for a conveyance tax to measure itself against. A schedule that is punishing on a sale is not addressed to an owner staying put, and reading it as though it were is the costliest mistake available on this subject.

One charge does land, and it lands per document rather than per dollar borrowed. The Building Homes and Jobs Act surcharge is $75 (California Government Code section 27388.1(a)(1), read 25 August 2026) on each title recorded. Its two exclusions cover an instrument recorded alongside a transfer that pays the documentary transfer tax, and a dwelling going to somebody who will live in it; on the face of the statute a new deed of trust over a house its owner already owns is neither. The charge that applies is indifferent to the size of the cash, and the ones that would scale with it are not in play.

The exemption on the tax bill is small, and it is not a shield

California takes $7,000 (California Revenue and Taxation Code section 218(a), read 25 August 2026) off assessed value for an owner who occupies the home, a modest reduction against the assessed values this state produces. It is named here for what it is not: it lowers the value the county taxes, it does not stand between a lien and the house, and it neither shrinks nor offsets an encumbrance of any size.

There is a clock on it. A claim that reaches the assessor by February 15 (California Revenue and Taxation Code section 255(b), read 25 August 2026) is worth the full amount; one filed late but before the December cutoff drops to $5,600 (California Revenue and Taxation Code section 275(a), read 25 August 2026). Refinancing disturbs neither, since the claim follows occupancy rather than the note.

The limit comes from a credit file, not from the code

The recited section above prints what the statutes say about capping a cash-out, and the answer is that they say nothing. That absence gets misread in the direction that costs money: no statutory ceiling is not the same thing as no ceiling. Three things do the limiting instead, and none of them is state law. The credit policy of whoever writes the loan. The guidelines of whoever buys it afterwards. The loan-to-value ceiling attached to the programme. All three move without anybody in Sacramento voting on anything, which is why this page carries no figure for the cash an owner might raise: that figure is an appraisal and a credit decision that have not happened yet.

One federal clock is worth naming because it is mistaken for state law so often. A conventional cash-out generally calls for 12 (Fannie Mae Selling Guide B2-1.3-03, dated 10 December 2025, read 25 August 2026) months of seasoning on the first mortgage being paid off, measured note date to note date. That is an investor eligibility rule, it applies wherever the house is, and no statute in this state imposes anything resembling it.

Where this page stops

Two fair questions go unanswered, because nothing sourced behind the page answers them: what a county recorder charges at the counter for a long deed of trust, since those schedules are set locally, and how an assessor treats a refinance bundled with a change to title. A gap is better than a figure that reads right.

BEDRWay is not a lender, not a broker and not a servicer, and nothing above is an offer of credit or a decision on anybody's file. A request goes in front of a licensed mortgage professional working in this state, and what they come back with is theirs.

Equity in a long-held house here is often the largest asset its owner has and the last they will touch, on a theory about the assessor the constitution does not support. The assessment answers to the chain of title. The size of the cash answers to a lender.