April 15th - "D-Day" (deadline day) for filing your income tax, or if you're like me - an extension. If you are lucky enough to be receiving a refund, here are some ideas on how you can re-invest them into one of your biggest assets - your home.
Here are 3 Ideas Thatâ€™ll Practically Double Your Money If Youâ€™re a Homeowner
- By: Alaina Tweddale
If this year is anything like the last, almost 7.2 million Americans will get a tax refund this spring averaging around $3,000. If youâ€™re a homeowner getting this refund, youâ€™re fortunate because youâ€™ve got more creative ways to invest it for a profit. Doesnâ€™t matter if youâ€™re selling, staying put, or stuck in the middle. Here are three homeowner-only options to grow that refund:
1. If Youâ€™re Early Into Your Mortgage
It may not be as instantly gratifying as a treehouse vacation in Costa Rica, but spending your tax refund to pay down your mortgage principal could save you enough funds to take a splurge-loaded vacation a bit later.
Letâ€™s assume you have a 30-year-loan at the average loan amount of $292,000, a 4.5% interest rate, and youâ€™re getting that average refund of about $3,000. If you apply that â€œfoundâ€ money to your principal each year, CPA Micah Fraim of Roanoke, Va., says you can shave years off your mortgage - in this case, nearly four. Thatâ€™s about 95 mortgage payments you wonâ€™t need to make! Even better is the more than $70,000 that youâ€™ll save in interest payments over the life of the loan.
If you donâ€™t want to make an annual commitment, think about this: Make that payment just once and youâ€™ll cut seven months off your payments and save more than $8,000 in interest. And when you decide to sell, youâ€™ll have more equity.
2. If Youâ€™re Planning to Sell
Invest it in staging, and you may be surprised by how quickly your home gets plucked from the market.
â€œStaging lets prospective buyers see the space as their own, instead of as belonging to the people who currently live there,â€ said Ashley Lewkowicz, owner of Ashley Kay Design in Bucks County, Pa.
â€œA home thatâ€™s not staged can sit on the market for six months or more,â€ she added. â€œA home I recently staged sold in less than two.â€
Not only is a faster sale better for your bank account in terms of saved mortgage payments and utility bills, but a drawn-out listing can cause a homeâ€™s price to wilt. That makes those throw pillows, decorative bath salts, and rented furniture way worth the investment.
For a large, suburban home in a major metro area, staging can cost about $2,000 upfront, and then about $500 per month for furniture and accessory rentals, according to Lewkowicz. But a faster sale at a higher price can definitely more than double your money over the course of the sales process.
And most staging can be accomplished with simple little touches.
3. If Youâ€™re a Home Improvement DIYer
Who knew your home could be your own personal ATM? For many DIYers, putting that $3,000 tax return into small home improvements can result in getting far more than their investment out of the house later.
A new steel front door costs about $250, but can add about $1,500 when you sell.
New wood flooring costs about $1,770, but is worth $5,000 when you sell.
Even new insulation, which costs about $700, can recoup about $2,000 at sale.
If youâ€™re willing to scope materials yourself and put in a little elbow grease, your tax return can fund a renovation for you to enjoy now and reap the financial benefits later.
Need more ideas? Give me a call, I'd be happy to consult!