How to spend your tax refund? To have such a problem. Usually, like most Americans, you’ve already spent your tax refund before you even get it. While splurging on a dream trip or putting it in a savings account are both worthy of your refund, you could seek wiser places to spend your tax refund that would make more financial sense.
Here are some home-related ideas for using your tax refund and if you know of someone looking to purchase a home with their refund, please forward them this article!
Where to Use Your Tax Refund in Your Home
1. Pay More Towards Your Principal Balance
Making an extra mortgage payment directly to your principal can add up to significant savings over the years. If you were to make one or two additional payments with your yearly refund, you might be able to shave a year or so off the life of your loan. At the very least, making an extra mortgage payment would save you on interest charges.
2. Use it as Part of Your Down Payment
If you’re a first-time homebuyer or are looking to buy a larger property, you can use your tax refund as part of your down payment! Saving for a down payment can take a while, especially if you don’t have extra income to do it with. But, with your tax refund, you’ll have a large chunk you can add to the down payment all at once.
Remember –it’s not necessary to put 20% down. There are home loan programs that require 0-3% down. Contact us to see if you qualify!
3. Pay Down or Pay Off Some Debt
Your credit score and debt-to-income ratio play a significant part in your qualification as well as the rate you get in your mortgage. If you have quite a bit of debt, use your refund to pay some or all of it down.
If you don’t have enough to pay it all off, make a large payment toward the one with the highest interest to get the most bang for your buck. Additionally, if there are some credit cards where you fell behind on the payments, set aside 6 months worth of higher-than-minimum payments and set it to autopay. Making on-time payments for a few months will help your credit recover while the extra amount will help to pay it down sooner.
4. Upgrade Your Appliances
How old is your refrigerator? When did you last purchase a new washer and dryer? If you’re having trouble remembering when, or it’s been more than 8 years, you may want to consider upgrading your appliances.
Even if they are in working order, your old appliances probably use a lot more energy than today’s models.
And energy inefficiency means an additional expense to you.
Another reason you may want to purchase new appliances is as a perk for selling your home. Include the new appliances in the sale of your home and not only will it help to sell your home more quickly, but you’ll also recoup your investment and then some.
5. Invest in Home Improvements
Similar to the above idea, you can use your tax refund to add more value to your home through a DIY project or two –or three! Check out these affordable DIY projects:
- Add a kitchen backsplash
- Install new luxury vinyl tile flooring
- Replace light fixtures
- Repaint the walls or add a stacked stone feature wall
- Replace your front door
- Spruce up the landscape
- Add a patio area with stone pavers
- Replace the bathroom vanity
There are so many possibilities with your tax refund, and our hope is that, no matter what you choose, that it brings you much joy. If that joy comes in the form of buying a home, give us a call! We can help make that dollar stretch and keep that interest rate low.