A Smart Way to Spend Your Tax Refund

SARASOTA, Fla., April 12, 2012 /PRNewswire/ -- It's tax season, and for Floridians who are getting a tax refund, an important step is to determine what to do with the extra money. One option is to invest your tax refund in your home.

"We each have unique financial needs and should consider the best way to put our tax refund to work for our individual situation," said Dave Maraman, Florida Regional President, M&I, a part of BMO Financial Group.  "For some, the right choice may be to establish a savings account or pay down high interest credit card debt; however, interest rates and home prices continue to stay at historical lows creating a good opportunity to take advantage of the housing market."

Consider the options below that best fit your housing situation in order to make your tax refund work for you. 

First-Time Homebuyers
Buying a home in today's market may make a lot of sense.  Taking advantage of today's historically low interest rates along with depressed home values make home buying a great opportunity and a tax refund can be used toward a down payment. Typically, down payments are 3 to 20 percent of the home's selling price.  There are a number of loan options along with grant and down payment assistance programs that are perfect if you are a first-time homebuyer. It is important that before you set out to buy a home you talk with a mortgage professional.

Refinance Your Home
With rates at historical lows, refinancing may help a homeowner lower their rate or change the length of the loan's term allowing them to pay off their loan quicker and save money on interest.  It's best to check with a mortgage professional you trust who can help determine if a lower rate or different loan term makes the most sense for your personal situation.

When considering refinancing, people often worry that appraisals and closing costs will outweigh the minimal monthly savings gained. So how do you know when these expenditures are a good investment in exchange for a lower rate?

"The first step is to determine how long you plan on staying in the home you're refinancing. Sometimes closing costs can be recouped in monthly savings over a longer period of time," said Maraman.  "An alternative is to use your tax refund to pay closing costs."

Pay Down Your Mortgage
Paying down your mortgage with your tax refund is also a great way to decrease your debt and increase equity in your home. If you plan on staying in your home for at least the next three to five years, consider investing your tax refund toward the principal of your mortgage.

For more on how to use your tax refund, stop by your local M&I branch and speak with a financial expert.

About BMO Harris Bank
Based in Chicago, BMO Harris Bank N.A. provides a broad range of personal banking products and solutions through over 650 branches and approximately 1,350 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Nevada, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. Deposit and loan products and services provided by BMO Harris Bank N.A. Member FDIC. Equal Housing Lender NMLS# 401052. BMO Harris Bank(sm) and M&I® are trade names used by BMO Harris Bank N.A. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with 1,600 branches, and a retail deposit base of approximately $180 billion.

SOURCE M&I, a part of BMO Financial Group

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