6 Home-Related Things You Can Do With Your Tax Refund
Tax Day has come and gone, and if you’re like many Americans, you’re expecting a tax refund in the coming weeks. You may be envisioning a splurge-worthy trip, a shopping spree or something fun with that money burning a hole in your pocket. But what if you did something different – and more financially meaningful – with your refund? A good place to start is with your home. Whether you currently own a home or plan to in the future, putting your money towards a real estate investment is arguably one of the smartest financial decisions you can make in your lifetime. Below, we’ll highlight six ways you can put that tax refund to good use on home-related expenses.
1. Pay more on your principal balance
Applying an extra mortgage payment or two directly to your principal each year can add up to big savings over the life of your loan. With the average tax refund coming in around $3,000, most homeowners could make at least two additional mortgage payments for the year. While it may not seem that significant, making two extra payments every year could shave years off your overall mortgage – even doing it once could help you save a hefty chunk of interest over time.
2. Put it toward a down payment
Haven’t bought a home yet, or planning to buy something bigger? Chances are, you could use some additional cash to put toward a down payment. What better way to do so than with your tax refund? Setting aside a decent amount of money all at once can put you on the fast track to building your savings and help motivate you to continue saving. While you don’t necessarily have to put 20% down to purchase a home, having the option to do so means you can avoid private mortgage insurance with a Conventional loan. So put that tax return to good use!
3. Pay down debt
If you’re hoping to buy soon and plan to take out a mortgage, paying down your revolving debt have a significant impact on your ability to purchase a home. That’s because lenders look at your debt-to-income ratio – the amount you owe compared the amount of income you bring in – and generally want to see your debt at 43% or less. ou could certainly pay down your debts across the board, but you may find it beneficial to tackle the one with the highest interest rate first to get the most bang for your buck.
4. Stage your home for a quick sale
Thinking about selling your home? Choosing to stage your house prior to listing it can significantly decrease the length of time it’s on the market. You could say it’s an investment that will pay off in dividends if it means your home sells more quickly – because you’ll end up saving on mortgage payments, utility bills and other home expenses in the long run.
5. Splurge on new appliances
Unless you bought a brand-new house, the odds are good that the appliances you inherited have some age on them. Buying a new suite of appliances is probably not at the top of your to-do list. However, there are some convincing reasons why it’s a good idea. One of the biggest reasons is to simply prevent any issues from arising.
Many household appliances have a lifespan ranging from 8-12 years (with some outliers), and it’s best to replace them before they stop working – or worse, before they cause harm to your home.
Another valid reason for buying new appliances is if you intend to sell your home soon – while they may not make or break the sale, a shiny new suite of appliances can certainly speed up the selling process.
6. Improve your home with a DIY project
You always hear how kitchen and bathroom remodels can drive up your home’s sale price, but the truth is, you don’t have to spend an arm and a leg in order to add value to your home. Smaller projects that improve the cosmetic appearance of your home can make a huge difference if you plan to list your home soon. Here are a few projects to consider:
Refresh your kitchen with a backsplash – Perhaps not the most inexpensive project out there, but you’d be surprised at how much a new backsplash can transform a room. Even if you aren’t in love with your cabinets or countertops, a beautiful, neutral backsplash can brighten things up.
Install new flooring to transform a room – New floors may sound intimidating, but there are some amazing options out there that are very inexpensive and look top-notch. If you wanted to spend even less, you could always DIY it, too.
Replace light fixtures in your home – Unless you really hit the home jackpot, you probably bought a place with builder-grade light fixtures. Take things up a notch with newer, modern lighting options and consider trying new finishes that match your doorknobs or cabinet hardware (if they don’t already).
Give your home new life with a coat of paint – Hands down, one of the best ways to reinvent your home on the cheap is by painting. A beautiful color can transform a room – but remember, calming neutrals are best if you’re planning to sell your home.
Add some charm with a new front door – Want to make your home more inviting? It can be as simple as replacing your entry door. We had a solid steel front door, but upgraded to a craftsman-style wood door with windows up top to allow light in. The changes to the appearance of our home are astounding and we receive so many compliments from guests!
Step up your landscaping game – The inside of your home may be gorgeous, but don’t forget to tend to the exterior as well. A nice, well-kept lawn and neatly manicured flowerbeds can go a long way toward adding curb appeal to your home. Small, simple projects like properly fertilizing your grass and keeping it cut, planting flower seeds or bulbs and laying fresh mulch won’t break the bank, but it’ll make your home look like a million bucks.
Feeling inspired to use your tax refund wisely on your home this year? We hope so! It only takes a small amount of money to make a huge impact on improvements to your current home or saving for future home buying plans.