Using Your Tax Refund to Increase Home Equity

April 3, 2017 By

Tax refund season is upon us! While doing our taxes can be dreadful, the real fun is when the refund comes back. The average tax refund in America is $2,857, that’s a lot of money that can be used for your benefit.

You may be tempted to use your tax refund to splurge, go on vacation, or buy something special; but one of the best ways to accelerate your savings and improve your finances is to take that refund money and use it on a home. You may have a great opportunity to invest in a down payment, or even home improvements, increasing your equity potential.

Down Payment

Coming up with a down payment for a home is one of the largest obstacles that renters face when they start the home buying process. That’s why during tax season, many first-time home buyers use their tax refunds as a down payment option.

Whether the refund will be a couple hundred, or a few thousand dollars, using your tax refund as part of your down payment can be an excellent way to save money. You could even place your refund into an account dedicated to your down payment fund. That way you won’t accidentally spend that money somewhere else.

If you’re diligent, you may be able to save your down payment quickly! 20% down payments are a myth of the past; PRM has lots of low down payment options that make getting into a home easier.

Home Improvements

Another excellent way to use your precious tax refund is to increase the equity in your home through home improvements. Taken from the Remodeling magazine’s 2016 Cost vs. Value Report these popular, cost effective home improvements could be a great use of your tax returns dollars:

Fiberglass Attic Insulation

The Department of Energy says that adding insulation to an existing home can save the owner money and will improve home comfort. This is of high value to potential buyers.

  • Cost to Homeowner: $1,320
  • Resale Value: $1,882
  • Cost Recouped: 142.7%

Manufactured Stone Veneer

In most cases, brick is out and stone veneer is what buyers are looking for. Curb appeal is important to new buyers as the recouped cost on manufactured stone veneer suggests.

  • Cost to Homeowner: $7,566
  • Resale Value: $8,942
  • Cost Recouped: 118.2%

Entry Door: Fiberglass or Steel

Curb appeal is key to attracting potential home buyers. It is also important to homeowners looking for a simple, cost-effective way to enhance the look of their house. A new front door can do a lot for a home’s curb appeal, not to mention home safety and security.

Fiberglass

  • Cost to Homeowner: $3,226
  • Resale Value: $3,607
  • Cost Recouped: 111.8%

Steel

  • Cost to Homeowner: $1,420
  • Resale Value: $1,470
  • Cost Recouped: 103.5%

Garage Door Replacement

Similar to the front door to a home, the garage door has a lot to do with curb appeal and home security. Even if you have ​no intention of moving, the garage door is the largest and most-used entry point of the home. An upgrade will keep the home looking fresh and modern, no matter how long you’ve lived there.

  • Cost to Homeowner: $1,852
  • Resale Value: $2,007
  • Cost Recouped: 108.4%

Minor Kitchen Remodel

It’s common knowledge that a kitchen remodel can increase the value of a home. However, the cost and return may be different depending on the home’s location and community. Remodels should be consistent with the rest of the home and other homes in your area.

  • Cost to Homeowner: $22,493
  • Resale Value: $23,187
  • Cost Recouped: 103.1%

 

Whether you’re using your tax refund towards a new home, or renovations potentially to sell the home you’re in, give PRM a call for all of your mortgage needs.

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