Refinancing Your Mortgage vs. Selling Your Home in 2026

How might interest rates, inflation, and home prices affect your decision?

Economic trends in 2026 play a big part in whether refinancing or selling makes the most sense. The Federal Reserve has pumped the brakes on additional rate cuts as inflation remains above target and the labor market shows a mix of strength and strain. After two cuts earlier this year, officials are sounding more cautious, which has lowered the odds of another cut by year-end.

Still, mortgage rates are expected to ease slowly. Fannie Mae projects they could drift down to around 5.9% by late 2026, a level many experts think could help wake up today’s sluggish housing market. Home prices are also continuing to move upward in most parts of the country.

The National Association of Realtors (NAR)’s latest report shows that 77% of U.S. metro areas saw price growth in the third quarter, pushing the national median existing single-family home price to $426,800, up 1.7% from last year.

This increase has helped homeowners build a lot of wealth, about $140,900 on average over the past five years. Rising equity is also driving more cash buys, which made up 30% of September’s home sales. The biggest price jumps are happening in markets where inventory is tight.

Taken together, these economic factors, slower rate cuts, gradual easing in mortgage rates, lingering inflation, and strong home values, shape whether refinancing or selling is the smarter move in 2026.

What refinancing might mean in 2026

Refinancing in 2026 could be appealing if mortgage rates slide closer to the projected 5.9% range. Lower rates can reduce your monthly payment, shorten your loan term, or free up cash through a cash-out refinance, especially if your home has gained significant equity.

However, if inflation remains sticky or the Fed delays further rate cuts, you may not see the dramatic rate drop you’re hoping for. Refinancing only makes sense if the long-term savings outweigh closing costs and you plan to stay in your home long enough to break even.

What selling your home might mean in 2026

Selling in 2026 could be advantageous if home prices continue their upward trajectory and buyer demand strengthens as rates fall. Rising equity means you may walk away with more profit, and tight inventory in many markets could help your home attract competitive offers.

But there’s a flip side: if rates decline too slowly, some buyers may still sit on the sidelines, making your market more unpredictable. According to HomeLight’s Q3 2025 Lender Insights & Predictions report, the majority of lenders (37%) revealed that buyers are waiting for rates to drop to around 5.75% before they’re willing to make a move. As of writing, mortgage rates hover around the mid 6% range.

Selling makes the most sense if there’s strong buyer demand, local prices are still climbing, and your home equity is strong.

Buyer’s market or seller’s market

According to HomeLight’s Top Agent Insights: AI Report, which surveyed over 300 top agents across the country, 41% of agents say buyers generally have the strongest bargaining power. However, the story changes once you look at individual regions.

In the Midwest and Northeast, it’s the sellers who hold more sway. But in the South Central and Mountain areas, such as Texas, Louisiana, Arizona, or Colorado, buyers typically have much more room to negotiate than the national numbers indicate, according to the surveyed agents.

For sellers in a buyer’s market, since buyers have more options and can negotiate harder, you need to price your home competitively and be flexible on terms. Homes often take longer to sell, which means presentation, marketing, and minor repairs matter even more.

To stand out, you’ll likely need to meet buyers where they are and highlight the value your home offers. You need to be open to providing concessions and accommodating repair requests.

Meanwhile, if you’re in a seller’s market, where demand outweighs supply, you may see faster offers and stronger sales prices. Buyers may be more willing to waive contingencies or accept your preferred timeline. Even so, strategic pricing and good presentation can help you maximize your return while the market works in your favor.

A top agent can make it happen

To get expert insight into today’s changing market, we spoke to David Lewis, a top real estate agent in the Atlanta, Georgia, suburbs with 17 years of experience. While interest rates are making many buyers hesitant, Lewis explains, “A good house in good condition at the right price always sells quickly.”

He recommends partnering with an experienced agent and a lender who are up to date on the changing market and knowledgeable on what will make your home desirable to today’s buyers. HomeLight can connect you with a top agent who is well-equipped to navigate a challenging market. It takes just two minutes to find an agent tailored to your needs.

Now that we’ve glimpsed the unique challenges of the 2026 market, it’s time to learn more about your options.

What’s the advantage of getting a new mortgage?

When you refinance your loan, you pay off your existing mortgage and replace it with a new loan with different terms and interest rates. With mortgage rates sitting above what many buyers find acceptable, many homeowners are holding off on refinancing. But in a typical housing market, what are some possible reasons to refinance?

Lowering your monthly payment

One way a refinance may lower your payment is with a lower interest rate than your original mortgage. If rates have gone down since you purchased your home, or your credit score or income has significantly improved, you may qualify for a more favorable rate.

Another way you can lower monthly payments is by extending the loan term. If your original mortgage was a 30-year loan, for example, and 10 years in, you decide to refinance to another 30-year loan, you’ll be paying the mortgage on that house for a total of 40 years.

However, the balance remaining after 10 years of paying will now be spread across 30 more years, significantly reducing your monthly payments. Note, though, that you’ll be paying interest for an additional 10 years, increasing your overall cost.

>>Learn more: Wondering how much to budget for a new loan? Use our Mortgage Payment Calculator to see your potential monthly payments and plan your next move with confidence.

Saving money in the long run

Getting a lower interest rate also reduces the total amount of interest you’ll pay over the life of a loan. And, did you know it’s possible to refinance and shorten the life of your loan? This means you pay interest over a shorter period, reducing the total interest on the loan significantly.

Cashing out equity in your home

If you’re looking to access equity, a cash-out refinance will let you do just that. With this loan, you’re actually borrowing more than what you still owe on the original mortgage — essentially converting your equity into available funds to see as you see fit.

Some consider this a risky financial move. As with any option, weigh the pros and cons of a cash-out refinance carefully.

Changing your loan type

Interest rates aren’t everything.

The type of loan you get is just as important. Every time you get a new mortgage or refinance, your lender will be looking at your existing financial data, including your current income, credit history, and outstanding debt, to determine interest rates and loan types for which you qualify.

So, if you’re making more money, carrying less debt, and have a better credit score now than when you purchased your home, you may be able to strike a better deal, replacing your 30-year variable rate mortgage with a 15-year fixed mortgage, for example.

However, if you’re making less, carrying more debt, or having credit trouble, your chances of getting a good deal on a new loan are slim. For instance, refinancing could require you to give up your slightly higher fixed-rate mortgage for only a slightly lower variable-rate loan. Even though the new rate is technically lower, you may wind up paying more in the long run.

How to examine current rates and compare loans

If you’re considering refinancing or selling due to financial need, the place to start is by comparing your existing mortgage rate with current ones. This will require some homework to understand the impact a different interest rate or a new loan type will have on your finances over time. Check out this Mortgages 101 Guide to understand loan types better.

Every mortgage lender determines its own rates, which is why experts recommend that you get quotes from multiple lenders and brokers. Moreover, those rates vary within each institution depending on the loan type.

For example, the same lender may charge 6.90% interest on a 15-year, fixed-rate mortgage for a new purchase home while charging 7.52% interest on a 30-year fixed-rate mortgage. When you refinance instead of buying new, those rates are often slightly higher for each loan type, depending on how you structure the loan.

With dozens of loan types and mortgage lenders to choose from, you have plenty of opportunities to find the one that best helps you financially. However, keep in mind that you may no longer qualify for the loan type you currently have.

What impacts your new or refinanced mortgage?

As we have seen, even if rates are lower on paper, that may not mean they’ll actually save you money in the long run. Let’s take a look at some factors that can increase mortgage rates and reduce the amount you save.

Loan-to-value ratio

A loan-to-value ratio (LTV ratio) assesses a borrower’s risk level by dividing the mortgage amount by the property’s market value, then multiplying by 100 to get a percentage. For example, if you need a $400,000 mortgage on a property valued at $500,000, your LTV ratio is 80%.

When you refinance, taking cash out of your home’s equity or rolling closing costs into the loan increases your mortgage balance — and therefore your LTV. If your LTV rises above 80%, lenders may charge higher interest rates or require mortgage insurance, which is why refinancing rates can be higher in these situations.

If you’ve paid your existing mortgage for several years — and your home’s value has risen during that time — then your LTV ratio has improved, and you’re likely to get a good rate.

However, if your home’s value decreased after taking out your existing loan — and you’re now upside-down on your mortgage — then your LTV worsened over time, even if you’ve been consistent in your mortgage payments. In this situation, your LTV ratio will only qualify you for the most expensive interest rates, if you qualify at all.

Closing costs, fees, and other unexpected expenses

Getting a new mortgage is going to cost you. Aside from the potential for mortgage insurance, you’re going to have closing costs and lender fees, which can be between 3% and 6% of your total loan.

There are also other expenses specific to you that must be accounted for when you’re calculating how much that lower interest rate is actually saving you.

For example, homeowners who received a First-Time Homebuyer Credit may need to repay that credit when closing out their first mortgage, whether refinancing or buying new.

So, keep in mind that an initial rate comparison may seem to indicate that you’ll save money with a better rate that lowers your monthly mortgage. However, those minimal monthly savings over time may not ultimately outweigh the amount you’ll pay in fees to get the new loan.

Work With a Top Agent to Sell in 2024

If you’re selling a home in 2023, more balanced market conditions mean that the experience and expertise of a top real estate agent have become even more essential. Connect with a top agent in your area, who can help sell your home faster and for more money than an average agent.

Find Agent

What’s the advantage of selling?

Selling your home can offer benefits that refinancing alone often can’t. While refinancing may lower your monthly payments or let you access some equity, selling allows you to fully capitalize on your investment and make a fresh start.

Here are some key advantages of selling compared to refinancing:

• Maximize your profit: Selling allows you to take full advantage of any increase in your home’s value, potentially earning more than a refinance could provide. Refinancing only changes your loan terms, and it doesn’t give you a lump sum of cash from selling.
• Move to a home that fits your needs: When you sell, you can choose a new home that better matches your current lifestyle or priorities. Refinancing keeps you in the same house, which may no longer meet your needs.
• Eliminate maintenance and financial responsibilities: Selling your home removes the ongoing costs and effort of upkeep, repairs, and property taxes. Refinancing doesn’t reduce these responsibilities, as it only alters your mortgage terms.
• Take advantage of a seller’s market: In a hot market, multiple buyers competing for your home, creating a bidding war, can drive the price higher. Refinancing can’t give you that competitive advantage because it only adjusts the terms of your existing loan.
• Access equity for other opportunities: Selling unlocks the full value of your home, which you can use to invest, save, or buy a new property. Refinancing usually only allows partial access to your equity through a cash-out option.
• Gain financial flexibility and a fresh start: Selling provides a clean break from your current mortgage, offering more freedom to plan your next steps. Refinancing keeps you tied to the same home and loan, limiting your flexibility.

What impacts your home sale?

Just as factors like your loan-to-value ratio and closing costs can influence your mortgage when refinancing, certain elements also play a big role when selling your home. Understanding these can help you maximize your sale price and make smarter decisions throughout the process.

Local housing market conditions

The state of your local housing market can have a major effect on how quickly and profitably your home sells. In a seller’s market, where demand exceeds supply, homes tend to sell faster and at higher prices. Conversely, in a buyer’s market, where inventory is high and buyers have more negotiating power, you may need to lower your price or offer incentives to attract interest.

Factors like regional economic growth, employment rates, and population trends all play a role in shaping the local market. Understanding these conditions helps you set a realistic price and plan the best timing for your sale.

Home condition and presentation

The condition and appearance of your home directly affect buyer interest and the offers you receive. Homes that are well-maintained, staged, and updated often sell faster and at higher prices than those that need repairs or are outdated in style. Even small improvements, like fresh paint or landscaping, can make a big difference in first impressions.

On the other hand, homes that require significant repairs or are cluttered can lower perceived value and prolong the selling process. Paying attention to presentation ensures you maximize your home’s appeal and competitive edge in the market.

However, if you don’t have the time or resources to prepare your home for sale, whether due to an urgent life event or other reasons, you can consider programs like HomeLight’s Simple Sale. This option lets you sell your home as-is and connect with cash buyers, making the process faster and eliminating the need for extensive repairs or staging.

>>Learn more: Wondering what your home could sell for in cash? Try our Cash Offer Calculator to get a fast, easy estimate.

Time to decide: Refinance or sell?

Every homeowner’s financial situation and existing mortgage structure are complex and unique, so there is no one-size-fits-all answer. To decide, it’s best to analyze your financial needs and seek expert advice for your specific situation.

Decide whether your financial need is short-term or long-term

“As real estate agents, people come to us with unique problems, and we help them understand the market,” so they can make the right decision, Lewis said. In any market, some people need to move because they’re relocating for work, dealing with a divorce, or in need of a bigger home for a growing family. In that case, it makes sense to sell, “especially if you have equity,” he says.

Lewis recommends meeting with a mortgage professional who can discuss financial vehicles that may help you reduce the mortgage costs on a new home. For example, the lender may have a rate buy-down program or offer a discounted rate for the first year or two. An adjustable-rate mortgage may be another option.

Rick Ruiz, a top agent in Las Vegas, Nevada, who sells properties more than 46% quicker than the average agent in that area, suggests homeowners looking to tap their equity decide if their need is short-term or long-term.

If your problem is short-term and very specific — say, you need help paying several large medical bills, but you’ve got typical monthly expenses covered — Ruiz suggests a third option that is especially helpful in a high-interest-rate environment: a home equity line of credit (HELOC).

Although this loan type still borrows against your equity, origination fees will be much lower than for a refinance. Plus, although you may be approved for a large amount, you only take out and pay interest on what you end up needing,  so you may not end up increasing your debt burden as much this way.

If your problem is long-term (and you don’t want or need to move for other reasons), Ruiz recommends a refinance over selling. “I’m a big proponent of holding real estate long-term,” he says. “I’m going to come from a place of what can I do to hold onto this asset if at all possible.”

Consult the experts

You don’t have to make such a complex and big decision alone.

The National Association of Mortgage Brokers (NAMB) offers a search feature to help you find a broker who can review your options with you. After working out the numbers with a refinancing expert, your next step is to consult with an experienced real estate agent. An agent will help you compare your potential refinancing savings with your potential profits from selling your home.

An agent is also your best resource for obtaining the comps of homes sold in your area so you can assess your home’s current market value, rather than letting your lender alone determine its worth.

Proceed with confidence

Deciding to refinance or sell is a personal financial decision. When you understand your options in light of today’s complex market, honestly assess your financial situation, and collaborate with experts, you’ll be equipped to make a smart decision for your home.

Reach out to an agent today to get personalized guidance and take the next step with confidence.

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