Tag Archives: mortgage

Six Ways to Optimize Your Tax Refund

According to the Internal Revenue Service (IRS), the average taxpayer received a $3,000 refund in 2017. This chunk of change—depending on how you allocate it—could make a big impact on your bottom line. Before you’re tempted to spend it on impulse buys, consider these options for maximizing your tax refund.

Boost your emergency fund. Financial experts say you should have three to six months’ worth of living expenses saved in an emergency fund to protect yourself in case of a job loss or another unexpected financial hardship. Stashing your tax refund into an emergency fund could get you well on your way to reaching that dollar goal.

Pay off high-interest debt. Doing this results in an instant return on your investment because you’re saving yourself from paying interest to the lender. If you have several debts to tackle, aim for the one with the highest interest rate first. If you can’t pay off the entire balance, look into transferring the remaining debt onto something with a lower interest rate, like a credit card or personal loan.

Prepay your mortgage. Putting extra money toward your mortgage payment is a great way to save money over time. Use your tax refund to make one additional, full mortgage payment. If you do this every year, you could shave off thousands in interest, shorten your repayment years, and build equity faster.

Fund an investment account. If you’re new to investing, a great place to start is at your local financial institution. Many offer competitive, low-risk investment options like money market or share certificate accounts. You could also consider putting your tax refund toward a Roth or traditional IRA, which can be great ways to save for retirement.

Save for the future. The IRS allows you to split up your refund into several accounts. Consider putting some, or all, into a special savings account to help fund a future purchase, like a vacation or next year’s holiday gifts. This is also a great opportunity to jump-start a college savings fund for your child.

Make home improvements. While your refund won’t cover an entire kitchen or bathroom remodel, you could make minor improvements such as painting cabinets, updating hardware, or installing a new backsplash. Look into replacing old appliances for more energy-efficient models or installing new windows to save on heating and cooling bills.

 

Presented by Member One Federal Credit Union

 

 

 

Home Buying and Renovation Budget Prep

So, you want to buy a house. Or, you’re considering a renovation. Looking at homes and upgrades is exciting, but don’t get ahead of yourself. While HGTV makes it look easy, purchasing a home or getting a second mortgage actually takes a lot of planning and preparation. Here are a few ways to get yourself ready:

Know your budget. You should spend no more than 25-28 percent of your monthly take-home income on a mortgage. Look at your monthly paychecks (after taxes) to see what that percentage would be so you aren’t looking at homes out of your price range. If you’re considering a home equity product (also know as a second mortgage), make sure the extra monthly expense keeps you in that 25-28 percent range.

Save the right amount. Traditionally, your down payment should be 20 percent of the purchase price to avoid paying more in interest and private mortgage insurance (PMI). If the home you want is $200,000, you should have $40,000 saved. Additionally, be prepared to pay closing costs, an inspection fee, appraisal fee, and a lender’s fee. There are loans that don’t require 20 percent down, but you’ll pay more in interest over time and PMI could be required.

Plan for future costs. If you have enough money to comfortably buy a home now, don’t forget about future expenses. Are you planning on starting a family soon? According to the USDA, a middle-income married couple spends an average of $727 a month on a child. Can your budget handle that with a mortgage? What if something breaks? You’re now responsible for home repairs and must plan for those unexpected expenses.

Home Equity Loans or Line of Credit. These options are for people who already own a home; they can be used for renovations, college costs, or even a vacation. When choosing a lender, you’ll want to look at their closing costs, interest rates, and fees. You should also consider if you want a lump sum up front (home equity loan) or a revolving loan that works like a credit card (home equity line of credit). And keep in mind that you’re essentially adding to your mortgage payment, so make sure you’re financially prepared.

Buying or making upgrades to a home should be exciting, but don’t let the thrill of the hunt overshadow the financial preparation. Do your homework and get your ducks in a row; when you’re ready, your dream house will be there.

Presented by Member One Federal Credit Union