If you are a homeowner, a tax refund presents opportunities to invest for a profit that aren’t available to renters. Whether you plan to sell, stay or are undecided, there are ways to optimize the financial impact of your refund. The first step is to treat your refund check the same as you treat your paycheck. Avoid the temptation to splurge and give that refund money a purpose. Here are three home owner-only options to grow that refund:

But, Are You Withholding Too Much?

Most of us enjoy getting a large tax refund every spring. But, a refund means you paid more taxes during the year than you owed and you gave the government an interest free loan. According to Martha Ferrari, VP of Halberstadt Financial Consultants Inc., her more astute clients have smaller refunds because “they realize they are giving the government use of the money by having too much withheld.” Change your withholding amount and reduce your refund to as close to $0 as possible. Then, put that “extra” money aside into savings.

Refinance or Pay Down Your Mortgage

It may not give the same instant gratification as buying a new TV, but using your tax refund to refinance or pay down your mortgage principal will save you enough buy the TV later.

When you refinance your mortgage, you still pay closing costs and fees. But, if you use the refund to pay for the closing costs, you can save thousands of dollars per year on mortgage interest.

Assume you have a 25-year-loan of $300,000 with a 5 year term, a 6.1% interest rate, and a $3,000 annual tax refund. If you apply that “found” money to your principal each year, you’ll pay off your mortgage 5 years and 9 months early. Even better, over the life of the loan, you save $74,738 in interest payments.

By making a $3000 payment just once, you cut 6 months off your payments and save more than $10,000 in interest. And, when you decide to sell, you’ll have more equity.

Sellers - Stage Your Home

Invest your refund in staging, and you may be surprised by how quickly your home sells.

Staging has taken the residential real estate industry by storm and many sellers are hiring professionals to help them make that critical first impression.

National Association of Realtors (NAR) President Chris Polychron says “staging is an excellent tool that can be used to give a home a little extra push for sellers... the impact it may have and the value it can bring is clear to both home buyers and sellers.” The statistics are are clearly in favour of staging.

• Sellers who spent $500 on staging recovered over 343% of the cost when they sold their home. (Homegain.com)
• In controlled tests selling identical homes, professionally staged vs. non-staged, the non-staged houses sold in 102 days, while the staged houses sold in 45 days. (Real Estate Staging Association)
• Staged homes sell in half the time of non-staged homes (Coldwell Banker survey)

A faster sale saves mortgage payments and carrying costs and a drawn-out listing can cause a home’s price to wilt. That makes those the investment worthwhile. And most staging can be accomplished with simple little touches.

Make Home Improvements

Home improvement projects can immediately increase the value of your property while simultaneously making your home more comfortable. Putting that $3,000 tax return into home improvements can result in financial benefits when you sell the house.

Generally, renovations that provide the best return on resale are superficial upgrades, like painting and decorating, with limited capital outlay and maximum impact.   According to the Appraisal Institute of Canada’s latest Home Renovation Survey, renovations with the highest return potential are kitchen and bathroom renos at 75 -100%, followed by interior and exterior painting at 50 - 100%.

And, if you’re willing to invest some “sweat equity” scope materials yourself and put in a little elbow grease, your tax return can fund a renovation for you to enjoy now and reap the financial benefits later.