Tax Day has come and gone and, like most Americans, you’re likely expecting a refund soon. While splurging on a dream trip or putting it in a savings account are both worthy uses of your refund, there are other things you could do that could make more financial sense.
1. Pay More Towards Your Principal Balance
Making an extra mortgage payment directly to your principal can add up to significant savings over the years. If you were to make one or two additional payments with your yearly refund, you might be able to shave a year or so off the life of your loan. At the very least, making an extra mortgage payment would save you on interest.
2. Use it for as Part of Your Down Payment
If you're a first time home buyer or are looking to buy a larger property, you can use your tax refund as part of your down payment! Saving for a down payment can take a while, especially if you don't have much extra income. With your tax refund, you'll have a large chunk you can add to the down payment all at once.
Remember -- it's not necessary to put 20% down. There are home loan programs that require 0-3% down. Contact Midwest Lending to see if you qualify!
3. Pay Down or Pay Off Some Debt
Your credit score and debt-to-income ratio play a significant part in your qualification, as well as the rate you get in your mortgage. If you have quite a bit of debt, use your refund to pay some or all of it down.
If you don't have enough to pay it all off, make a large payment toward the one with the highest interest to get the most bang for your buck. Additionally, if there are some credit cards where you fell behind on the payments, set aside 6 months worth of higher-than-minimum payments and set it to pay automatically. Making on-time payments for a few months will help your credit recover while the extra amount will help to pay it down sooner.
4. Invest in Home Improvements
You can also use your tax refund to add more value to your home through a DIY project or two! Check out these affordable DIY projects:
There are so many possibilities with your tax refund, and our hope is that, no matter what you choose it brings you much joy. If that joy comes in the form of buying a home, give Midwest Lending a call! We can help make that dollar stretch and keep that interest rate low.