Judging from last year, almost 7.2 million Americans will get a tax refund this spring averaging around $3,000. Homeowners have a unique opportunity to invest that money for a profit. Depending on your situation, here’s how:
If you’re early into your mortgage, you might consider using your refund to pay down your mortgage principal. CPA Micah Fraim of Roanoke, VA. suggests that if you have a 30-year loan at the average loan amount of $292,000 with a 4.5% interest rate, $3,000 applied to your principal each year can cut nearly four years off your mortgage. That’s about 95 mortgage payments saved or more than $70,000 saved in interest payments over the life of the loan. Even if you are hesitant to an annual commitment, make that $3,000 payment just once; you’ll eliminate seven months off your payments and save more than $8,000 in interest. You’ll also have more equity if you decide to sell.
If you’re planning to sell, invest the money in www. Ashley Lewkowicz, owner of Ashley Kay Design in Bucks County, PA., says, “Staging lets prospective buyers see the space as their own, instead of as belonging to the people who currently live there.” Therefore, your home may sell faster, and faster is better for you in terms of saved mortgage payments and utility bills. A longer listing may pull down your home’s price – far more than the cost of throw pillows, a few decorative pieces, and some rented furniture! Lemkowicz states that the staging of a large, suburban home in a major metro area can cost about $2,000 upfront and then about $500 per month for furniture and accessory rentals, but a faster sale at a higher price may more than double your money.
If you’re a home improvement do-it-yourselfer, investing your $3,000 tax refund in small home improvements can result in a far bigger payoff later. For example:
– a new steel front door costs about $250, but can add about $1,500 at sale.
– new wood flooring costs about $1,770, but may bring $5,000 when you sell.
– new insulation, costing about $700, may earn about $2,000 at sale.
If you’re willing to invest your refund and some work, you can enjoy the renovation now and collect the financial benefits later.