It’s here! The flowers are beginning to bloom and the birds are chirping… That’s right: It’s tax season. While the thought of sitting down to tackle those tax forms may not make you jump with joy, the possibility of a refund certainly can.
But before you start daydreaming about all the things you can do with that extra dough, let’s talk about how to use it wisely, especially when it comes to your home. From adding some swanky upgrades to your living space to finally buying that dream home you’ve always wanted, there are endless possibilities for making the most out of your tax refund. So, grab your calculator and let’s get ready to make your home goals a reality!
Tax Refund Ideas for Homeowners
Home Improvement Projects
Undertaking home improvement projects and upgrades can not only enhance the value of your property but also simplify your everyday household chores. However, repairs and renovations can often be quite expensive, and a tax refund can provide a helpful financial boost. If you intend to utilize your tax refund money for home upgrades, it’s important to consider which projects will offer the greatest return on investment. Some of the most effective ways to maximize your house project investment include replacing outdated appliances with energy-efficient ones, installing a new front door or garage door, and refreshing your kitchen by painting walls and replacing countertops. If you plan to sell your home in the future, these types of improvements could significantly increase its appeal to potential buyers.
Pay Down Mortgage Principal
Depending on your refund amount, you may be able to speed up your mortgage payoff by putting your refund towards the principal. This should then reduce the interest in the long run, also saving you money over the life of the loan! Reducing how much you owe can help you save money over the life of the loan in interest. If you intend to utilize a portion or all of your refund to decrease your mortgage principal, make sure that you inform your lender about your plans to apply the additional payment appropriately.
Tax Refund Ideas for Home Buyers
Save for a Down Payment
Sometimes, the biggest hurdle on the journey to owning a home isn’t always finding the right property. For some, it’s coming up with the money for a down payment.
A down payment is an amount you pay upfront when you take out a mortgage. The higher the down payment, the lower the interest rate. Using your tax refund to boost your down payment can save you money down the road. The recommended down payment is 20% of your home’s purchase price, but the average first-time home buyer only put down 6% in 2021. Don’t let the 20% number scare you away from your dream home!
Pay Other Home Buying Fees
Besides the down payment, there are more fees involved while purchasing a home. But, using your tax refund to help cover these fees can help make the home buying process less intimidating.
Earnest money is put down before closing on a house to show you’re serious about purchasing. It’s also known as a “good faith deposit.” The amount is usually around 1-3% of the home’s asking price. The deposit is placed in an escrow account and returned to the buyer once the mortgage process is complete.
The buyer also usually pays for a professional home inspection of a potential house. The home inspection is a written report that assesses the condition of the property and any necessary repairs or maintenance issues.
And, there’s also fees that fall under the umbrella of Closing Costs. These include title insurance, property taxes, attorney fees, appraisal fees, and more.
So, how are you using your tax return this year? Let us know if you have any questions about which home improvement projects offer the greatest return on investment or the best way to start your home search. We’re here to help! And, if you’ve decided to take a trip instead, we look forward to receiving your postcard! 😉