Tax season is here, and for some Albertans, that means a tax refund could be on the way. If you've been dreaming of owning your own home, you could use your upcoming tax return to make your dreams a reality! Along with other government incentives for first time home buyers, your tax returns might be the extra bit of cash that you need to invest in a new home.
The state of Edmonton's housing market means that buying a brand new home is an affordable investment, as incomes are higher and homes are cheaper than most of Canada. You can expect home values to rise in the coming years, which means that building a new home is a great investment for the foreseeable future.
Know How Much Your Down Payment Will Be
Many buyers tend to believe that a down payment for a new home is simply out of their budget. However, you might be surprised just how much your tax return can help when it comes to putting a down payment on a home.
For example, a home that costs $297,000 requires a 5% down payment (this is the minimum amount required for a down payment), which comes out to $14,850. For many higher middle-income earners, their income tax refunds will be able to cover a good chunk of this amount. In Canada, the average tax return for 2019 was about $1,740. Your refund might not cover the entire amount of your down payment, but it can go a long way in helping you raise the necessary funds to put a down payment on your new build.
Your tax refund could also be saved over a few years to help increase your financial health and purchasing power in the future. A financial advisor can help you decide what to do with your refund to grow your financial health. There are many options that you'll be able to discuss with your financial professional such as putting your tax refund into a high-earning interest account, among other choices.
Why Use Your Tax Refund?
Whether you're currently renting or living at home, it might be a good idea to think about making the leap into home ownership. If you're renting a home, condo or apartment, you may actually be able to lower your monthly payments by purchasing a new home or quick possession. When you own your own home, making mortgage payments is building your equity instead of someone else's. Putting a down payment on a home can help increase your financial net worth.
Using your tax refund for a new home is a great idea when you know you can afford the monthly mortgage payments and other expenses related to owning a home. But, if you don’t need any help in the down payment department, you can also use your refund to help you save for furnishings and decorations for your new place. Keep in mind that once you close on your purchase, you’ll need to think about moving, doing the required landscaping, and other related expenses like home and mortgage insurance. Using your tax return to cover these expenses is a great idea if you already have your down payment lined up.
Purchasing a new home is not as daunting or as scary as you may think. While it’s one of the biggest purchases you’ll make in your lifetime, it’s also one of the most exciting. It’s a lot of fun to plan and build your family’s dream home, and the best part is that building a new home or moving into a quick possession doesn't have to break the bank. Using your tax refund to put towards the costs of a new home can make it that much more affordable!