What Should I Do With My Tax Refund?
Tax season is an exciting time, especially for those individuals who are expecting a tax refund! Having some extra money on hand is a refreshing change of pace for many.
With tax refunds comes opportunity. When it comes to making the most of your tax refund, you have many options to choose from.
Expecting a tax refund this year, but you are not quite sure what to do with it? Consider these options for how to make the most of your tax refund!
3 Responsible Ways to Spend Your Tax Refund
Don’t let your tax refund go to waste! There are numerous ways you can spend your tax refund that will benefit you in the long- and short-term.
1. Buy a House
Okay – so a tax refund may not be enough to buy a house outright. But if you’ve been saving effectively to purchase a home, your tax refund might be enough to round out the amount you need to make a down payment and more forward with buying a house!
Gone are the days of “you must have 20% down to buy a new home.” Many FHA, USDA, and VA mortgages are now designed for low or no down-payment necessary. There are even conventional mortgage programs that no longer require 20% down.
(You can learn more about what to realistically expect when it comes to making a down payment here.)
For some clients, a tax refund is enough to cover an entire down-payment! If you are hoping to stop renting and start owning your own home, tax refund time is a great time to do it. Additionally, monthly mortgage payments may even work out to be the same (or less) than the monthly rent payments you’re currently making. Contact us for more details; we’d be happy to help you determine if buying or renting a home is right for you at this point.
Wondering how much you’ll need for a down payment? We can help you figure that out. It all depends on which program you qualify for and what the sales price of the home you are hoping to purchase. There are many down-payment choices depending upon what your overall profile looks like, your eligibility based on VA status or property location, and income limitations.
2. Improve Your Credit Score
There are various factors that impact your credit score. Two factors that influence your credit score are the amount of credit (loans) you have outstanding, and another is paying your bills on time.
Your tax refund can be incredibly useful when it comes to improving both of these factors. If you want to make an effort to improve your credit score, consider using your tax refund for the following:
- paying down your car loan
- paying down your student loans
- paying down your mortgage
- paying down any debt you may owe
- paying off credit card bills
While this can help you in the short term by reducing your monthly expenses, in the big picture making an effort to pay off or pay down your debts, loans and credit card spending may also help to improve your credit score. If you do not already own a home, an improved credit score may help you to qualify for a more competitive home loan in the future!
Looking for other tips for improving your credit score in the coming year? Find some helpful tips for doing so here.
3. Start (Or Continue) Saving
Some tax refunds are large while others are relatively small. No matter what amount of money you receive as your tax refund, it will be enough to get started with saving.
Whether you choose to start an emergency fund to save for unforeseen expenses, or you start a savings account to save for something special (a trip, a home, a new car, etc.), using your tax refund to jumpstart your saving efforts is a responsible decision that will enable you to make the most of your refund.
Do Something BIG With This Year’s Tax Refund!
Whether you choose to pay down your debts and improve your credit score, start saving for a home, or put the money towards a down payment, your tax refund can make a big difference when it comes to getting you into the house you have always dreamed of, whether in the near future or sometime down the road.
With your tax refund in hand, purchasing a new home might be more feasible than you think. If you’re ready to make a life-changing impact with this year’s refund by using it towards the purchase of a home, give us a call today at 518-782-1202 or contact us online to find out how we can help you make it happen.
Interested in learning more about saving for a home?
These resources are a great place to start:
How Much Do I Need for a Down Payment on a House in New York State? – Find out what to expect when it comes to putting a down payment on a house. You may be surprised to learn that you’ve already saved enough.
How to Save For Your First Home – Read through some helpful tips for saving up to buy your first home. Implement some – or all – of our 7 strategies for saving up and you’ll have enough for a down payment sooner than you might think!
Home Buying Myths You Should Stop Believing – Learn about some common misconceptions about the home buying process, including myths about financing, credit scores, down payments, and more.
Editor’s Note: This content was originally published in 2018 but has been updated as of January 2019.