HOMEBUYING: 6 ways to use your tax refund to buy a home
- Noir Holdings, LLC
- Apr 17
- 2 min read
It is the season for tax refunds to start making their arrival. If you’re in line to get a tax refund, you might be able to use that cash to launch your home purchase. If you don’t have a plan for your tax refund, it can get you so much closer to owning a home. Here are six ways to use those funds for homeownership.
Down payment
Many mortgage programs require a minimum 3% down. To avoid paying private mortgage insurance premiums, you’ll need to put down 20%. With the median home price over $400,000 that means you’ll need to have $12,000 to $80,000 saved up for a down payment. Your tax refund can build up your down payment fund.
Closing costs
Closing costs are based on a percentage of the mortgage loan amount you are taking out. They generally run 2% to 5% of the loan amount, so if your loan amount is $350,000, budget for closing costs of $7,000 to $17,500. Your tax refund can help you pay for your closing costs.
Discount points
Every point you buy will discount your mortgage interest rate by 0.25%. A point is 1% of your loan amount. If your fixed-rate mortgage interest rate is 6.25% and you buy one point, your new interest rate will be 6% for the life of the mortgage. If you bought two points, your new interest rate is 5.75%. If your mortgage amount is $350,000, one point would be $3,500. Keep in mind that points may be tax deductible; consult with your tax professional for details. If you have closing costs and down payment funds in hand, consider using your tax refund to lower your interest rate and pay less each month for the life of your fixed-rate loan.
Emergency fund
Buying a home can eat into your savings. Keep cash socked away in an emergency fund and use your tax refund to replenish this savings. Your tax refund can boost your emergency fund.
Extra savings
You can never have too much money stashed away when you own a home. You may want to plan for a remodel, upgrade, or repair. Having extra savings can help you avoid using credit cards or taking out an extra loan to pay for such work. Use your tax refund to build up your extra savings account that you have earmarked for such projects.
Decor and furnishings
When you purchase a home, you want to buy new furniture for this room and decor for that room. Or you realize you want to change a light fixture, or buy a new area rug. Putting away your tax refund for such purchases after you buy a home is a good way to avoid extra debt.
Looking to buy a home?
Check out Noir Holdings’ upcoming homes available for sale in established neighborhoods in suburban Chicago: www.noirholdingsllc.com Buy direct from Noir Holdings and save!
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