Thinking About Refinancing Your Mortgage in Early 2026? Here’s What You Need to Know

As 2026 gets closer, many homeowners who have higher mortgage rates may be wondering if it’s finally a good time to refinance.

Here are the main points to consider if you’re thinking about refinancing your home loan in early 2026.
 

What’s Affecting Mortgage Rates in 2026?

Mortgage rates depend on the bond market, not just the Federal Reserve’s (Fed’s) interest rates. However, what the Fed does and says still has some influence.

There are important Fed meetings planned for the end of 2025 and early 2026, and mortgage rates often move in anticipation of these events.

Some key things that affect mortgage rates are:
 

• Inflation (the rate at which prices go up)
• Employment numbers
• The general stability of the financial system

If inflation keeps falling and gets closer to the Fed’s target (around 2%, while it was about 3% last September), it’s possible that mortgage rates could drop a little, making refinancing more attractive.
 

When Does Refinancing Make Sense?

Refinancing can be a smart move, but you should know your own financial situation.

Calculate how much money you’d actually save if you refinanced at a lower rate.

For example: If someone got a $500,000 30-year mortgage in 2022 at 7% and refinanced in 2026 at 5.75%, their monthly payment could fall from $3,327 to $2,786—a savings of about $550 per month.

Remember to include closing costs, which are usually between 2% and 6% of the loan amount. For a $500,000 loan, that could mean paying $9,500 to $28,000 or more up front.

It’s usually worth refinancing if you plan to stay in your home long enough to “break even” from these costs. For example, if refinancing costs you $9,500 and you save $550 a month, you'll break even in about 17 months.
 

Steps to Plan for a 2026 Refinance

 

1. Review Your Current Mortgage: Know your current interest rate, loan balance, and how much you pay each month.
2. Compare Offers: Get quotes from at least three different lenders because rates and fees can be very different.
3. Calculate Break-Even Point: Divide the total cost to refinance by your monthly savings. This is how long it’ll take for refinancing to pay off.
4. Think About Loan Term: Decide if you want a longer or shorter loan. A shorter loan might mean higher payments but less interest overall.
5. Pay Attention to Timing: With key Fed meetings coming, rates may move. Ask lenders how long they can “lock in” your rate.
6. Look at the Big Picture: Think about your overall financial goals, not just your monthly payment.

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