Is It A Good Idead to Refinance Your Mortgage in Early 2026?

As we get closer to 2026, many homeowners who got mortgages with higher interest rates might be wondering if it’s finally time to refinance for a better deal.

With inflation starting to cool off, mortgage rates dipping a bit, and some important Federal Reserve meetings coming up at the end of 2025 and the start of 2026, there’s a lot to watch for if you’re considering refinancing.

Here’s what you need to know.
 

What’s Different About Mortgage Rates Going Into 2026?

Mortgage rates are mostly affected by the bond market, though the Federal Reserve (the Fed) does play an indirect role. The Fed will hold meetings on December 9-10, 2025, and again in January and March 2026.

These meetings are important because the possibility of the Fed raising or lowering rates can cause mortgage rates to shift—even before any decisions are actually made.

Key things to keep an eye on if you want to refinance:
 

• Inflation: If inflation keeps dropping toward the Fed’s target of 2%, mortgage rates may also fall.
• Unemployment and job market news: These provide clues to the economy’s health.
• General financial stability: Changes in the broader economy influence rates too.

In September (the most recent data), annual inflation was still at 3%. If inflation continues to slow, mortgage rates could drop more, making refinancing more attractive—especially if you got your loan between 2022 and 2024, when rates were higher.
 

When Does Refinancing Make Sense?

1. Check Your Potential Savings

Start by looking at how much you could save each month if you refinance. Even a small drop in your interest rate could lower your monthly bills. For example:

If you took out a 30-year mortgage for $500,000 in 2022 at 7%, your payment might be $3,327 per month. If rates drop to 5.75% in 2026, refinancing could cut your payment to $2,786—a savings of about $550 every month.

2. Closing Costs

Refinancing isn’t free. You’ll pay closing costs, which are usually 2% to 6% of your loan amount. For a $500,000 mortgage, that’s $10,000–$30,000.

You'll need to decide whether the monthly savings are worth these one-time expenses, especially if you don’t plan to stay in your home for many more years.

4. Calculate Your Break-Even Point

Figure out how long it will take to make back what you spend on refinancing.

Divide your total refinancing costs by your monthly savings. That tells you how many months you need to stay in your home to break even. If you plan to move before then, refinancing might not be worth it.

Check Your Emergency Savings

It’s smart to have three to six months’ worth of living expenses saved up.

Don’t use up your emergency fund just to refinance—it’s important to be able to handle a job loss or surprise expenses.
 

A Simple Plan to Prepare for Refinancing in 2026

 

1. Review Your Current Mortgage: Note your balance, interest rate, loan term, and if you have mortgage insurance.
2. Get Multiple Offers: Ask at least three lenders for written estimates. Compare interest rates, fees, and monthly payments.
3. Calculate Your Break-Even Point: Make sure you’ll save enough by refinancing for it to be worthwhile.
4. Choose a Loan Term: Decide if you want to keep the same loan length, shorten it (to save on total interest), or extend it (for a lower monthly payment).
5. Timing Matters: Rates can change quickly, especially around major Fed meetings. Ask lenders about options if you need more time to lock in a rate.
6. Look at the Big Picture: Think not just about your monthly payment, but the total cost over the whole loan, especially if you roll the closing costs into your new loan.

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