Housing: How To Invest Your Tax Return

By: Raevyn Jones, Marketing Coordinator, NHS of Baltimore

Whether or not you have filed your tax return, how you will spend your tax refund always comes to mind around this time. Investing some money from your tax refund is one of the best ways to spend it. However, before you make the decision to invest your tax return, you should think about how your refund fits into your investment strategy. For homeowners or people looking to become homeowners, this refund could have a long term impact.

One of the biggest things you may want to consider when thinking about investing is your housing fund. In order to receive the best possible interest rate on a house and avoid private mortgage insurance, it is smart to have a good amount of savings for your down payment. Other programs and housing incentives can assist you with your down payment.

Using your tax refund to eliminate current debt is another good investment if you are looking to buy a home. Eliminating debt with the highest interest rate will cost you less money in interest in the long run. With current credit card interest rates usually being 14% at the minimum, paying off your debt is an excellent investment. The higher your credit score, the better deal you will be able to get on a house.

If you are a homeowner, investing in your home may be the best investment that you will ever make. There are many affordable ways of investing your tax refund to increase the value of your home. Upgrades and improvements to the kitchen or bathroom are great ways to maximize a return on the investment of your home. This investment could prevent major problems down the road as your house gets older. Also if for some reason you ever choose to sell your home, you have increased the value of it. Renovations to your home may also be written off on your tax return for the following year.

Another good investment for homeowners is paying down the principal of your mortgage. Contributing additional money to your mortgage will allow you to pay the loan off sooner and you can save thousands of dollars in interest over the life of the loan. Interest rates are currently lower than ever, so if you are eligible to refinance your hope this may be a good option as well.

Although a tax refund cannot change your future by itself, it can have a long-term financial impact. For more ideas on how to invest your tax refund, you may want to opt to take a free financial fitness class.