Is there any better feeling than getting a check you weren’t expecting? If you were fortunate to receive a refund on your taxes this year, then you may be wondering what the best use of that extra money is. For those buying or selling a home, that tax refund can be a huge benefit to you. Here are some ways that you can use your tax refund wisely in the real estate market.
Watch your down payment grow
Saving for a down payment can be one of the biggest obstacles to buying a home, especially when you’re doing it for the first time. That’s why it can be such a huge benefit to use your tax refund to help fund your down payment. It can be just the thing you need to get you started, inspire you to continue saving, or finally push you over the finish line.
Use it to pay for closing costs
One thing that some homebuyers forget to calculate into the cost of buying a home is the fees you’ll be charged at closing. When you buy a home, you can expect to pay up to five percent of the purchase price in closing costs. These can include agent commissions, title searches and insurance, and homeowners insurance, among others.
Pay down existing debt
Is debt keeping you from realizing your dreams of homeownership? Then use your tax refund to help pay down your existing debt including credit card balances and other loans. Having less debt will help you more easily qualify for a home loan and get better terms on that loan. Paying down your debt improves your debt-to-income ratio and credit score, both of which are very important to lenders.
Use it for your earnest money deposit
When you put in an offer on a home, you’ll also make an earnest money deposit. This is a good faith deposit that shows the seller you’re serious about your offer. You can expect to pay up to three percent of the home’s price as your earnest money deposit.
Pay for your home inspection
While some buyers are waiving their rights to an inspection in order to have their offer accepted, this is generally not advised. Getting a home inspection when you’re buying helps you to understand what issues you may be inheriting with a home and can help give you bargaining power should you find any. While prices vary depending on location and home size, you can expect to pay anywhere from $200-$500 for a home inspection.
Make repairs or upgrades
If you’re selling your home, then your tax refund can benefit you as well. Are there any repairs or upgrades you’d like to make before you put your home on the market? Your tax refund can pay for those renovations so that you can help your home stand out from the competition.
Use it to help buy your next home
Finally, sellers can also use their tax refund to help with the purchase of a new home. That money can be used to upsize or downsize and pay for other expenses that are related to the purchase of your new place.
