Securing a mortgage is a significant step in the home buying journey, and avoiding common…
Did you get a big tax refund this year? If that’s you and you aren’t sure what to do with it, here are a few ideas for those who are homeowners.
Put It Towards Principal
If you still have a mortgage, putting a sizable amount toward the principal balance can drastically reduce the amount that you pay over time. While it won’t lower your monthly payment (unless you refinance), it can cut off months or even years on your home loan. When you take out a mortgage, the lender assumes that you will pay it back in even payments over the life of the loan, usually 15 or 30 years. Your initial payments go toward the interest that they calculate will be due if you do take that entire time to pay off the loan. Putting extra money towards principle in the beginning means paying less in interest.
Upgrade Your Home
Getting a big tax refund check might be just what you need to put on an addition, remodel a room in your home, or update the landscaping in your backyard. When deciding if this is the right step for you, consider your overall financial picture and make sure that you don’t have other debts or obligations to take care of first. Also make sure to overestimate your remodeling budget to account for unanticipated issues that might come up. If it’s still the right time to get some new style or features, think about what can increase value to your home.
Make Needed Repairs
For those who live in older homes or homes with existing repair issues, getting a larger tax refund might be just what you need to get things back in order. Taking care of repairs as soon as possible can also save money and headaches down the road by preventing more serious (or costly) issues from developing. Consider preventative maintenance as well when deciding what to do with your tax refund.