Are you expecting a substantial tax refund this year? Instead of splurging on the latest TikTok finds, consider putting the cash to good use to secure your financial future. Whether you’re saving for a home, paying off debt or planning for the future, using your tax refund wisely can set you on a path to long-term financial success. Here are five ways to make the most of your tax refund.
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1. Put it toward a down payment.
One of the most impactful uses of your tax refund is putting it toward a down payment on a home. Whether you’re a first-time homebuyer or seeking an upgrade, a larger down payment can lower your monthly mortgage payment and potentially eliminate the need for private mortgage insurance. Plus, a substantial down payment could make you a more attractive borrower to lenders, improving your chances of securing a favorable mortgage rate.
2. Fund your closing costs.
Buying a home comes with additional expenses beyond a down payment. One of those is closing costs, which are typically 3-5% of your loan amount. These fees can add up quickly and catch a borrower off guard. Using your tax refund to cover closing costs can ease the financial burden of purchasing your dream home.
3. Buy down your interest rate.
A lower interest rate can significantly reduce the overall cost of borrowing for a mortgage. Consider using your tax refund to buy down the interest rate on your mortgage, allowing a smoother transition into homeownership. Even a small reduction in the interest rate can be a noticeable difference on your monthly payment and overall cost of the loan. Learn more about How Temporary Buydown Programs Can Increase Affordability for Home Buyers.
FBC Tip
Use our Buydown Calculator to understand how different temporary and permanent rate buydowns can affect your monthly mortgage payments.
4. Pay off debt.
Credit cards and personal loans have high interest rates and can be a costly drain on your finances. Use your tax refund to pay off or pay down these debts. Start with debts with the highest interest rates to maximize savings and get you one step closer to financial freedom.
5. Increase your savings.
Use your tax refund to boost your emergency fund or contribute to your retirement savings. Building up an emergency fund can provide a lifeline in case of unexpected expenses or a job loss. Consider using these extra funds to maximize your contributions to your 401k, IRA, or a High-Yield Savings Account. A small contribution now can grow significantly over time thanks to the power of compound interest.
FBC Tip
Depending on your income, you may qualify for Free File, an IRS program that lets taxpayers prepare and file their federal tax returns online at no cost.
Whether it’s helping you save for a larger down payment, manage your closing costs, or buy down your interest rate, your tax refund could get you closer to your dream home. For those who aren’t ready to make a home purchase, paying off current debts or increasing your savings could help you secure a better financial future. Contact one of our mortgage professionals to explore how you can leverage your tax refund to reach your goals.
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Why Choose FBC Mortgage?
FBC Mortgage, LLC is a leader in helping home buyers with fast and simple loans. We’re dedicated to exceptional customer service and are always available when you need us most, even at night and on the weekend. We’ll help you navigate your new home purchase, and keep you updated along the way with weekly check ins, so you know you’re taken care of. That’s one of the many reasons why 95% of our clients would recommend us to their friends and family. It’s also why the nation’s top home builders and Realtors trust FBC to help their new home buyers.
Buying a home is one of the most important financial decisions you will make. Understanding mortgages and the home buying process can help make it less stressful, and so can partnering with a mortgage lender you can trust. At FBC Mortgage, LLC, we’re dedicated to helping home buyers finance their dream home.
All information presented is for educational purposes only and not intended as financial advice. FBC Mortgage, LLC is a national mortgage lender headquartered in Orlando, Florida. Specializing in residential mortgage lending, including purchase, refinance, construction, and renovation loans. See what our clients have to say. NMLS#152859 EHL ©2024.
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