As tax season approaches, many people look forward to receiving their tax returns. Instead of splurging on a vacation or new gadgets, consider using your tax return to help reach your real estate goals. Here are three creative ways to do so:
1. Build Up Your Down Payment
One of the biggest hurdles for homebuyers is saving for a down payment. With the average down payment for a home being around 6%, that can equate to a significant amount of money. There are many loan programs out there that don’t require the typical 20% needed for a conventional loan. For example, using a USDA loan or FHA loan can cost as little as 3.5% for certain borrowers.
If you’re struggling to save enough for a down payment, consider using your tax return to help build up your savings. Put your tax return directly into a savings account dedicated to your down payment. By doing so, you’re not only increasing your savings but also earning interest on the money you put in. Additionally, having a larger down payment can help you secure a better mortgage rate and potentially lower your monthly payments.
Want to hold the money while you build your credit or fulfill your lease term? Make sure you tuck that money away into a high-interest account. When you are ready to make your purchase, your funds will be waiting for you, along with a little bonus that can help cover miscellaneous costs and fees.
2. Invest in Home Improvement Projects
If you already own a home, you may want to use your tax return to invest in home improvement projects. Not only can these projects improve your quality of life, but they can also increase the value of your home. Consider projects such as updating your kitchen or bathroom, adding a deck or patio, or even landscaping your yard. These projects can not only make your home more enjoyable to live in but also make it more attractive to potential buyers if you decide to sell in the future.
When choosing which projects to invest in, make sure to do your research to ensure that you’re getting a good return on your investment. Some projects, such as adding a swimming pool, may not add as much value to your home as the cost to install it.
Adding value to your home can make a big difference at the selling table. To help you reach your real estate goals, why not fix up your current house, sell it for top dollar, and use that cash to help you purchase your dream property? Whether you want to buy a multi-family property, residential home, or commercial space, you’ll be able to do it when selling your listing-ready home.
3. Pay off High-interest Debt
While it may not be as exciting as investing in your home, using your tax return to pay off high-interest debt can be a smart financial move. High-interest debt, such as credit card debt, can quickly add up and make it difficult to save for a down payment or invest in your home. By using your tax return to pay off high-interest debt, you can save money in the long run by avoiding paying interest on that debt.
Additionally, paying off debt can improve your credit score, making it easier to secure a mortgage with a better interest rate. When choosing which debt to pay off, consider focusing on the debt with the highest interest rate first. This will save you the most money in interest in the long run.
Waiting Can Cost You!
No matter what you choose to do with your tax return this year, try to make it work for you. Put that money into something that will benefit you long-term such as real estate or a high-interest account. Don’t hesitate! Many people spend their time waiting to be ready, when in fact the time to act is now!
Do you have some lofty real estate goals? If you are expecting a tax return this year, why not invest it into your future as opposed to simply spending it? Using your tax return to help reach your real estate goals can be a smart financial move. Whether you’re saving for a down payment, investing in home improvement projects, or paying off high-interest debt, there are many creative ways to use your tax return to improve your financial situation. By making smart financial decisions, you can set yourself up for success in the Houston real estate market.
Natasha Carroll Realty provides this material for informational purposes only, and not as legal or tax advice. Before making any investment, you should always seek the counsel of your accountant or attorney! Have questions? Reach out to our team to learn more about the current market and ways to reach your real estate goals! (832) 346-7631