Keith Asks… With tax season upon us, what is the best way to utilize my tax refund?

As April 15 quickly approaches many of us are now getting to work on gathering all the documents (W2s, 1099s, Mortgage Interest Statements, Bank Interest Statements, Receipts for Charitable Donations etc.) necessary to properly file our taxes. This is all in hopes that we’ll actually receive a nice tax refund!  For many tax refunds often times are expected and are already spent on things you need….However, if you haven’t designated that money for something else yet – consider applying it towards your mortgage.

Let’s say for this instance, that this year you’ll receive a refund check from the IRS for $4,000. If you currently have a 30 year, fixed rate mortgage loan of $200,000 on your home at a rate of 4.125%, your principle and interest payment is $ 970 per month .  If you were to keep the loan for the full term and never prepay the principle the total payback on the mortgage would be $349,000.  Now to cut back on that amount of money you paid in interest, you can easily allocate your tax refund money to your mortgage each year. An extra $4000 put towards your mortgage annually is nearly the equivalent of 4 extra payments per 12 months. On this schedule you would pay off your mortgage in just under 20 years and save over $ 116,000 in interest payments.  Inflation will vary from year to year but you get the point!

So, my best advice is that if you receive a tax refund this year, consider applying your entire tax refund towards your mortgage loan. By doing so, you are making a sound financial decision that will save you a great deal of money in the future!

Meet Cheryl!

About Cheryl

As a successful business owner and community leader, Cheryl Braunschweiger is known and respected for getting things done with a degree of skill and enthusiasm that bring out the best in those around her - colleagues, clients and friends. The name of her business, ALMC Mortgage, reflects Cheryl's philosophy and personality. She says it stands for All Loans Must Close –a reflection of her determination to do whatever it takes to serve her clients. Cheryl has been in the mortgage lending business for 20 years. Read More About Cheryl
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