Rene Munoz

Mortgage Loan Originator

NMLS# 242107

281.541.1948

Tax Refund Season Means Help for Homeownership

Tax Refund Season Means Help for Homeownership

As we head into tax season, you may be anticipating a big tax refund being deposited to your bank account soon. Before you mentally spend that money, you might want to consider how it could help benefit your homeownership aspirations or experience.

Home Purchase

If you are hoping to buy a home this spring, your tax refund can be a huge boost to your mortgage resume. There are several ways you can use it:

  • Down Payment – While there are excellent loans that require as little as 3% down on a home purchase, larger down payments can lower the interest rate you are offered, your monthly payments, your lifetime interest costs. And if your tax return can bring your down payment up to 20%, you’ll save lots of money by not having to pay private mortgage insurance (PMI) on your loan.
  • Closing Costs – When your mortgage closes, there will be additional costs to pay your lender, like origination, title search, and appraisal fees. Closing costs can add up to between 3% and 6% of the loan balance. Your tax return can help cushion that financial hit.
  • Discount Points - You can use your tax refund to buy down your interest rate with discount points. A point is equal to 1% of the loan total and each point typically lowers your mortgage rate by 0.25%. That could save you lots of money in the long run.
  • Earnest Money - When you go under contract with a home sale, you’ll have to make a deposit called earnest money that is a good faith act that you will complete the purchase. Earnest money deposits can range from 1% to 3% of the sales price and your tax return could help pay for that upfront cost.
  • Improve Credit Score – You cannot buy your way to a better credit score, but if you have a lot of debt, using your tax return to pay it down will boost your credit within a few months. A better credit score means a better can at mortgage approval and lower interest rate offers.

Homeownership Costs

If you already own your home, your yearly tax return can be a great reinvestment into your biggest asset.

  • Repairs – Keeping your home in good condition is important to maintaining its value. If you’ve been waiting to fix that leak or retile your roof, your tax refund might be the catalyst for getting it done.
  • Renovations – Making strategic updates to your home can increase its market value. Kitchen and bathroom remodels as well as updates and additions can be a smart way to use your tax money.
  • Equity – You can also choose to sink your tax return right back into your home directly. Paying extra principal on your mortgage will give you more equity and save you interest on the back end.
  • Refinancing – A tax refund can also help pay the closing costs for a home refinance loan. These mortgages can be right for you if you want to get a lower interest rate, shorten your loan term, take a co-borrower off the mortgage, or pull cash out of your home.
  • Second Home Investment – If you are interested in expanding your real estate portfolio, buying a second home to rent out or just for your own vacation needs, then your tax return can contribute to the costs of that purchase.

While there are an infinite number of ways you can spend your tax refund money this year, consider putting it toward your homeownership needs for long-term gain.

Give us a call today if you or someone you know would like to explore homeownership this year.

These materials are not from HUD or FHA and were not approved by HUD or a government agency.