You may expect a sizable tax refund this year. That leads to the big question: What should you do with that money?
Sure, you could save it. You could use it to pay down high interest rate credit card debt. You might even use it to start an emergency fund.
But if you already have plenty of savings and no credit card debt, why not invest your tax refund into improvements that could boost the value of your home? Depending on the size of your refund, you could tackle home improvement projects both big and small.
Interested? Here is some advice from home improvement experts, real estate agents and financial experts about the best ways to turn that tax refund into a valuable home improvement.
A Kitchen Facelift – Without the Big Price Tag
Evan Harris, CEO of San Diego’s SD Equity Partners, a lender that specializes in loans to house flippers, says that updating your kitchen cabinets can instantly boost your home’s value and make your kitchen a more esthetically pleasing room.
And redoing kitchen cabinets is far more affordable than gutting your entire kitchen, Harris adds.
“The kitchen is a major focus of the home, so why settle for a kitchen that you hate?” Harris asks. “You don’t need to do a full remodel to make your kitchen warmer and more inviting.”
Instead, you can use your refund dollars to update cabinets with a fresh coat of paint. This will instantly brighten your kitchen, Harris says.
An Affordable Bathroom Boost
Kathryn Bishop, a real estate agent with Keller Williams Realty in Studio City, Calif., says homeowners can take the same approach with another important area of their residences: bathrooms.
Instead of spending on a gut renovation—which is far too expensive for typical tax refund amounts—homeowners can instead use their refunds to make more modest improvements to their bathrooms, Bishop says. This could include adding new faucets, a low-flow toilet or a new sink counter.
Owners might also use their refund to remove old wallpaper and either paint or add new wallpaper, Bishop adds.
“Keeping your home in good repair and updating the look outside and inside will add value to your home,” she says.
A Fresh Coat of Paint
One of the best uses of your refund is also one of the most affordable: a new paint job.
Painting interior and exterior walls can make old homes look fresh. New coats of paint in neutral, soothing colors can also make a home look more inviting.
“As a 22-year veteran REALTOR®, I have found the easiest and most efficient way to increase the value of your home is by painting the interior and exterior of your house,” says Marianne Bornhoft, a real estate agent with the Spokane, Wash., office of Windermere Real Estate. “A fresh coat of paint creates a whole new look and feel for a house with very minimal expense, especially if you do it yourself.”
Small Improvements Outside
Sacha Ferrandi, founder and principal of Source Capital Funding, a real estate finance company that operates in Minnesota, California and Arizona, says that one of the easiest ways to increase the future selling price of a home is to improve its curb appeal. Fortunately, doing so isn’t overly expensive. Ferrandi recommends hiring a professional power washer to scrub the exterior of your home clean. This can make an impressive difference for a low price, she says.
“A report by realtor.com® found that washing a house can add up to $15,000 to the sale price of some houses,” Ferrandi says.
She said that adding color to your home’s outside can also make your home both more attractive and valuable and recommends buying a new mailbox, address plaques or sleek new address numbers.
These, Ferrandi says, can “instantly revitalize the cobweb cluttered 80s style typography” that many homes still feature.
Larry Patterson, franchisee of Glass Doctor in Dallas, says that new windows are one home improvement that provides a solid return on investment. He points to the most recent Cost vs. Value report released by Remodeling Magazine. The report found that window replacements recouped an average of 75 percent of their costs. Bigger improvements such as kitchen and bathroom remodels only recovered 50 percent to 60 percent of their costs.
Patterson suggests using refund money to help pay for window replacements, upgrading your home’s current windows with energy-efficient glass versions that will reduce your yearly energy bills.
You’ll enjoy “more comfort, less fading and lower energy bills throughout the summer,” he says.
Adam Glovan, field manager of Mr. Rooter Plumbing of Buncombe and Henderson counties in North Carolina, says that homeowners can boost the value of their homes and cut their utility costs by investing in new plumbing appliances.
Glovan points to dishwashers. By using your refund to buy an ENERGY STAR®-rated dishwasher, you’ll not only save on your water bill, but on your electric bills, too.
“This is an investment that homeowners will see a return on in the long run,” Glovan says.
Glovan also recommends an investment in low-flow showerheads and sink faucets, both of which don’t cost much money. These upgrades will lower the amount of water you consume each year, cutting your water bill.
Pay Down Your Mortgage Principal
It might not fit into the typical idea of home improvement, but you could use your tax refund to improve your home equity situation by putting the money directly toward your mortgage principal.
In addition to helping you gain additional equity in your home and pay off your mortgage faster, this helps you save on mortgage interest. Just how much depends on your situation, but to give you an idea, let’s give one hypothetical situation.
Let’s say you had a 30-year, $200,000 loan with a 4.25 percent interest rate. For the purposes of this example, your loan was originated in Michigan. Fees may vary slightly depending on where you live. Let’s say it was a good year, and between state and federal taxes, you got $1,700 back. You decide to put that entire amount back on your principal.
In the scenario above, our client would end up saving seven months of payments and $4,294.31 in interest based on this one-time payment alone. It’s important to note that the numbers listed are estimates. Actual savings may differ. Still, you definitely have the ability to make that refund go a long way. If you’d like to try it out with your own numbers, check out [this] amortization calculator.
A version of this article originally appeared on Zing! by Quicken Loans.
For more information, please visit www.quickenloans.com.
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