Putting Your Tax Refund Toward Homeownership

Throughout tax season, many people imagine how they will use their tax refund. One excellent idea is to put it toward financing a new home. Using your tax refund is just one of the ways to secure funds for a down payment and closing costs when purchasing a house.

Maximizing your tax return is a wise move, and investing or reinvesting in homeownership is a great way to do so. Whether you’re a home buyer or a homeowner, you can utilize your tax refund in multiple ways to either buy a new property or increase your home equity.

Here are nine ways to spend your tax refund for homeownership.

Purchase a Home

It comes as no surprise that the busiest home-buying season typically begins around Tax Day and early spring. For most Americans, the prime time to purchase a home is from April to June. As expected, buyers are eager to save as much as possible to cover the various expenses associated with buying a home, such as down payments and closing costs. Every penny counts, especially during this competitive season.

  1. Pay Down Debt: Your credit score is one of the more crucial factors that will determine your mortgage interest rate. One of the easiest ways to increase your credit score to buy a house is to pay off high-interest credit card debt.
  1. Down Payment: The down payment is the money you give to the home’s seller upfront. The rest of the payment to the seller comes from the home loan that we are happy to provide. Use my mortgage calculator to estimate the down payment for your dream home. Keep in mind that when you make a down payment of less than 20%, you typically have to pay private mortgage insurance (PMI). PMI protects the USA Mortgage from losing money if you end up in foreclosure.
  1. Earnest Money Deposit: Earnest money is a deposit made to a home seller showing a buyer’s good faith in completing the transaction. The amount of an earnest money deposit varies from city to city, but it usually ranges from 1% to 3% of the sales price of the property.
  1. Saving Home Inspections and Home Maintenance: A home inspection is an examination of a real estate property’s condition and is often paid for by a potential home buyer. This written report provides a breakdown of a property, including an assessment of necessary or recommended repairs, maintenance concerns, or other issues.
  1. Other Closing Costs: There are other home buying costs outside the ones we’ve mentioned thus far which aren’t negotiable. Learn more about these closing costs, specifically the negotiable ones, to increase your purchasing power.

Build Home Equity

Homeowners have the opportunity to increase their wealth through various methods such as reinvesting in their homes, refinancing their current home loans to improve cash flow, or purchasing a second home. It is important to carefully consider your financial situation before deciding which option is best for you.

  1. Repairs: Most repairs are inexpensive and DIY-friendly, but sometimes they can be costly and require a handyman like installing new shingles for your roof or refinishing hardwood floors. It really depends on the difficulty of the job and your comfort level.
  1. Remodels: Renovating your home, if done right, can increase its value and make it that much more desirable to live in. The key to getting a bigger return for your investment is finding the right home improvement projects that provide the best value.
  1. Refinancing Costs: If you’re looking to save thousands a year, then refinancing is the way to go. You can pay off high-interest debt, lower your interest rate, drop your mortgage insurance, or shorten your home loan term. In some cases, you can even take advantage of more than one of these benefits. However, it takes money to save money and there are refinancing costs and requirements.
  1. Buying a Second Home: Financing a second home, whether it’s an investment property or vacation home, can be a lucrative investment.

How you choose to spend your tax return is entirely up to you and even getting a tax return back this year can be considered a win, but if you want to create sustainable long-term wealth then consider putting your tax return toward homeownership! Our local lenders are ready to help!

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