Has your family been dreaming of a new home? These 5 tips will help you use your tax refund to help achieve the American dream of homeownership!
The average tax refund for the 2018 filing season was nearly $3,000 and the IRS doles out more than 110 million of them every year, according to IRS data.
If you’re expecting to get a refund this tax season, instead of spending it on things that you don’t need, consider using it to invest in your future! What better way to do so than using your tax refund as a down payment on the home of your dreams.
But wait, can I really do that??
You sure can! Check out these 5 ways that your tax refund can help you get there:
1. Put It Toward a Deposit
When you get your tax refund, you can put it in a savings account at your bank to build up a deposit fund. Keep adding to the fund and before you know it you could have the key to a new home in your hands!
Plus, the larger the deposit amount you put toward a new home, the less you will have to borrow and pay in interest over time.
2. Apply It to Closing Costs
Even if you choose to finance your home purchase, you can still put your tax refund toward closing costs that can be incurred when you’re buying a home:
- Attorney fees
- Appraisal and inspection fees
- Title insurance
- Escrow costs
These are costs that are typically incurred in the home purchase process, depending on which lender you choose. They can’t always be rolled into your monthly mortgage payment, so it’s good to prepare ahead of time for them. Your tax return can be a great way to help pay for these costs.
3. Put It Toward Taxes and Insurance
After you’ve purchased your home, you may need to pay your property taxes and home insurance costs, which is where your tax refund can come into play.
If both your property taxes and home insurance are included in your monthly mortgage payment, you could consider using your tax refund to purchase additional insurance and greater financial security like an umbrella or life insurance policy. Consult with your insurance agent to determine what type of additional insurance is best for you!
4. Use It to Cover Moving Costs
Even if your entire home buying process goes smoothly and you’ve done a great job of managing your finances and saving money, it’s still possible that you’ll have moving expenses to deal with.
Your tax refund can help cover additional costs like:
- Renting a moving truck
- Purchasing packaging material
- Paying utility service deposits
- Feeding your friends pizza after they help you move all day
5. Use It to Build Your Emergency Fund
Every homeowner should have an emergency fund — a savings account with a balance that can cover several months of expenses, including your mortgage payment. You could add your tax refund to your emergency fund to help protect you from financial issues in the case you have any unexpected expenses, such as a major car repair or natural disaster, or in the event of job loss, illness or other income interruption.
Written By: Kalley Y