Though it’s tempting to spend that hefty tax refund on splurge items—shopping sprees, a vacation or even just a fancy dinner out—if you’re a homeowner, you may want to think twice.
Large tax refunds can actually be a great way to lower your mortgage balance, save money on interest, and even improve the value of your property.
Put simply? It could mean more cash in your pocket—not just now, but for many years to come.
Are you a homeowner? Are you awaiting a nice refund this tax season? Here are a few ways you may want to use it:
- Make a double payment on your mortgage. Paying above and beyond your regular monthly mortgage payment benefits you two-fold. First, it lowers your overall balance, meaning you’ll pay off your loan faster and with less interest. It also quickens the time until you can cancel PMI (private mortgage insurance), which can save you hundreds of dollars a month. To see how much paying extra toward your mortgage could save you, check out our mortgage calculator with property taxes included.
- Pay off other debts and refinance. If you’ve got a few high credit card balances or a car or student loan, think about using your refund to pay those off—either partially or in full. Then, you can apply for a refinance loan. With less debt and a better credit score on your side, you’ll be primed for a lower interest rate, and that means thousands saved over the next decade.
- Make some carefully chosen home improvements. Use your refund to make some choice renovations on your property. Invest in a smart thermostat, install a patio, or replace your old roof. Make sure to choose projects that will add value when it comes time to sell. For help, see our recent post on adding long-term value to your home.
Do you have a big tax refund on its way? Then check out our mortgage calculator. Taxes aside, lowering your overall mortgage balance could have a serious impact on your monthly cash flow, as well as the amount of interest you’ll pay over the course of your loan.
Paying off debts and refinancing can also save you cash in the long term. Get in touch with an Embrace loan officer to learn more or to start the refinance process.