Are you excited for tax season yet not sure how to invest your tax refund? Put it to work by realizing your real estate goals. Buying a house and tax returns go hand-in-hand since there are many ways to apply your refund to the home-buying process. Your tax refund is your hard-earned money. Invest it in real estate to improve your financial situation and build sustainable, long-term wealth. Read on to learn how to invest your tax refund in your real estate goals. 

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How to Invest Your Tax Refund in Buying a Home

The home-buying season picks up just as Americans start receiving their tax returns for a good reason: applying your tax refund towards a home purchase can speed up the process and lower overall costs. (Have questions about the home-buying process? Check out our first-time home buyer guide to get started.) The following are ways to use your tax refund towards a home purchase.

Pay down debt

When lenders determine your mortgage rate, your credit score is one of the most critical factors. Use your tax return to pay down debts to improve your credit score and debt-to-income ratio. 

The down payment

A down payment is an amount you pay upfront when you take out a mortgage. The higher the down payment, the lower the interest rate. Using your tax refund to boost your down payment can save you money down the road. Also, putting forward at least a 20% down payment means avoiding paying private mortgage insurance (PMI). PMI protects lenders in the case of mortgage default. Paying PMI is not ideal as it increases your monthly mortgage payment. Not sure how much mortgage you can take on? Use our handy mortgage calculator to find out.

Earnest Money Deposit

In a hot housing market, buyers need to stand apart from the competition to show sellers they’re serious about buying their homes. If you don’t want to lose out on your dream home, you can offer a seller an earnest money deposit. The amount is usually around 1-3% of the home’s asking price. The deposit is placed in an escrow account and returned to the buyer once the mortgage process is complete. Using your tax refund as an earnest money deposit is a smart way to lock in the home of your dreams.

Home inspections

The buyer usually pays for the home inspection of a potential house. The home inspection is a written report that assesses the condition of the property and any necessary repairs or maintenance issues. A professional must carry out the home inspection, which can cost up to $400 or more. 

Closing costs

Purchasing a home is a costly process, with fees outside of the ones listed above. These include title insurance, property taxes, attorney fees, appraisal fees, and more. A tax return can help cover these fees and make the home buying process less intimidating. 

Savings for home maintenance

Buying a home comes with many maintenance issues that can pop up at the most inconvenient times. Homebuyers can boost their confidence by depositing their tax returns into a savings account for future home repairs. Not sure how much to set aside? Experts say you should save 1% of the home’s purchase price annually for home maintenance. 

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How to Invest Your Tax Refund in Building Home Equity

Use your tax refund wisely by increasing the value of your home, refinancing current home loans, and possibly purchasing a second home. The following are ways to use your tax refund to build home equity.


Maintaining a house or condo can be expensive, and repairs are inevitable for the home-owning experience. Extensive repairs–such as fixing a deck or replacing a water heater–can take a massive bite out of your savings. Using your tax return to tackle significant repairs is a great way to increase your home’s value. Completing repairs now can pay off later down the road when you sell your home. 

Refinancing costs

Refinancing your mortgage is a smart way to save thousands each year. Doing so can lower your interest rate, get rid of mortgage insurance, and possibly shorten your home loan. Refinancing costs, such as application fees, appraisal fees, title search, and title insurance, can rack up quickly. Putting your tax refund towards a mortgage refinance is a smart way to save money in the long run. 

Purchasing a second home

You can put your tax return to work by investing it in a second real estate property. Whether you use it as a vacation or rental home, an additional property builds equity and creates passive income opportunities. Not sure where to buy your second home? Buying a house in NJ is an excellent real estate investment. The state has high rental demands, improving employment rates, and boasts some of the top schools in the country.

Buying a House in NJ? Casa Real Properties Can Help.

Want to learn more about how to invest your tax refund in your real estate dreams? At Casa Real Properties, our expert real estate agents know how to maximize your refund by applying it to a new home or investment property. They have years of experience guiding clients through every step of the home-buying process and can provide invaluable insight into the NJ housing market. Contact us today to get started on your home-buying adventure.

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About the Author: Nancy Pavic

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Nancy Pavic is an expert in the New Jersey real estate market. For the past 25+ years, she has brokered Casa Real Properties, a well-distinguished real estate office in the Northern New Jersey area. Her prestigious awards include membership into the Top 1% of Realtors, the “Circle of Excellence” award by the New Jersey Association of Realtors, a front page cover spread of Top Agent Magazine, and a recipient of the Mayoral Award for Financial/Real Estate at the 2009 Paterson Women’s History Awards Ceremony.