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How homebuyers can use their tax refund towards homeownership
Dated: May 18 2021
Successfully submitting your income tax returns is one thing – it’s how you make the most of your tax return that will make a major difference. If you’re looking for one of the best ways to take full advantage of your tax return, investing or reinvesting into homeownership is a smart move. Whether you’re a first-time buyer or a homeowner looking for a new residence, there’s multiple ways to leverage your tax refund in order to buy a home or build more home equity. In this page, we give you several ways to make use of your tax refund for homeownership.
Purchasing a home
Every bit counts when you’re trying to purchase a home, especially in a competitive real estate market. Here’s where you can put your tax refunds to good use:
- Down payment - For first-time buyers, saving up for a down payment is one of the biggest hurdles on the path to homeownership. It is the money you will need to pay upfront to a home seller in order to purchase a home.
You will then pay the rest through a home loan provided by your mortgage lender.
- Paying down your debt - One of the most significant factors that determines your mortgage interest rate is your credit score. By using your tax refunds to pay off high-interest credit card debt, you’ll be able to increase your credit score to purchase a home.
- Earnest money deposit – To show good faith towards completing a transaction, buyers make a deposit of earnest money to the seller. The exact amount of this deposit varies from city to city, typically ranging from 1% to 3% of a property’s sale price.
- Closing costs – Apart from the standard home buying costs, there are other closing costs you might not be aware of such as property tax, title search fees, title insurance, attorney fees, credit report fees, and so on.
Building home equity
Your tax refunds can also be very helpful when it comes to building home equity, which is often the most valuable asset you will have as a homeowner.
- Remodels – Renovating your current residence, as long as it’s done right, will help boost its value, in addition to making it a more desirable living space. The best way to get a significant return for your investment is to find the most ideal home improvement projects that will provide the best value.
- Repairs – While some repairs might be costly and time-consuming, others are quite inexpensive and doable, even for novices. The key is to find the right balance between your comfort level and the degree of difficulty required by the type of repair you’re considering.
- Refinancing costs – Refinancing can help you save thousands of dollars a year. You can reduce your interest rate, shorten your home loan term, drop your mortgage insurance, or pay off any high-interest debt you may have.
Although you have full control over how you want to spend your tax return, using it towards homeownership is always an excellent way to help you build sustainable long-term wealth. For more home buying tips, check out some of our previous blog articles here. Looking for the best homes in the Phoenix metro area? Work with the best real estate agent in Arizona today! Get in touch with Aeris House Properties at 602.671.2343, or send us an email at email@example.com