Funding your home purchase or sale can feel daunting. For those looking to buy, you need to prepare for expenses including things like your down payment and closing costs. For those looking to sell, maybe you want to make a few updates or repairs before putting your home on the market but don’t have the funds to do so.
However, one solution can be found in a place that might surprise you - your taxes! Specifically, your tax return.
Today we’re diving into how you can use your tax refund to help achieve your homeownership goals this spring.
A Closer Look At The Average Tax Refund
According to SmartAsset, the average American will receive a $2,897 tax refund this year. More specifically, in the states of MA and NH, the average tax refund comes out to $2,834 and $2,674 respectively.
While it may be tempting to go on a shopping spree or plan a vacation with the extra cash, this refund could be the key for you to make a change to better your lifestyle by buying that perfect home or making a move to a home that better suits your needs.
How Buyers Can Utilize Their Tax Refund
If you’re looking to buy, there are multiple ways that your refund can help you out during the homebuying process. A few areas this money can go to include:
- Growing your down payment fund - Your tax refund can be the perfect kick-off to growing your down payment fund. If you’ve already started accumulating the money, this extra boost could get you closer to your goal or allow you to expand your down payment amount.
- Paying for your home inspection - Your home inspection is an additional cost that you’ll need to pay out of picket. They are typically well worth the cost, but it is something that you need to plan for. Having some extra cash available from your refund will help cushion any inspection costs that you’ll need to pay during your homebuying journey.
- Saving for closing costs - Closing costs are a collection of fees and payments made to a variety of individuals who assisted you with your purchase. The average cost is typically between 2-5% of the purchase price of your home. Those fees are then totaled and presented to you 3 days before your closing date with the expectation that you’ll come to the closing table with a check for that amount. This is an additional cost from your down payment. They are often not the most welcomed expenses but having some extra cash available through your tax refund can come in handy here.
- Extra funds to furnish your new space - Purchasing a new home can mean that it's time to purchase some furniture to meet the needs of your new space. Your tax refund can be used to help facilitate those purchases. Keep in mind that if you’re in the middle of your purchase, spending large amounts of money on furniture is often a no-go, so be sure to run any large purchases by your lender before you get shopping.
- Start that emergency fund - When you own a home, there are going to surprises. Repairs, maintenance, and replacements will need to be made. Having an emergency fund available for when you need it can be a major weight off your shoulders. Your tax return can be a great start or contribution to your emergency fund so that you never feel strapped for cash when the unexpected happens.
How Sellers Can Utilize Their Tax Refund
If you’re planning to sell but would like to put some work into your home before that for-sale sign goes up, your tax refund can help! Keep in mind that in the current market, you may be better off selling your home as-is rather than investing additional funds into your home. Always be sure to have a conversation with your trusted real estate agent to determine what projects are worth it for your home sale. With that in mind, some items your tax refund can go to if you’re selling include:
- Making small upgrades - Making small upgrades can help your home sell for top dollar. These include boosting your curb appeal with fresh landscaping or updating your kitchen finishes for a more modern look.
- Make repairs - Taking the time to fix anything that needs repair will allow you to present your home in the best possible light. Spending some of that refund is a great use of the extra funds.
- Buying your next home - If you’ve been wanting to sell but aren’t sure that you have the cash to buy the home that’s right for you, this refund can be the kickstart that you’re looking for to move up or downsize sooner rather than later.
Don’t let the idea of funding your home purchase or sale deter you from reaching your goals. Your tax return money is a perfect opportunity for you to build up your funds and take those next steps. If you have any questions about how to make the most out of this opportunity, reach out to your trusted real estate expert. They’ll be happy to help you come up with a plan!