Ok, let me clarify what my last post was about. Two days ago my mortgage broker called me to entice me to do a re-finance. Something we’d need the interest rates to go down to 4% to make worthwhile for us. I’m not sure we’ll see rates go that low.
During the conversation he mentioned the $7500 Tax Credit that Rick and I qualify for. Of course he told me a few facts about it but then I did my own research and found out that it’s not really a credit on your taxes like it sounds, it’s more of an interest free loan for the full 15 year term. Meaning that this year we could take a $7500 tax credit and get $7500 in addition to our regular income tax refund and then each year for the next 15 years the IRS would keep $500 of our future tax refunds.   My mortgage broker brought up a few interesting things one could do with $7500 that they obtain interest free. A money market account. A CD investment, etc. etc. etc.
Rick and I would simply love to put that money into a savings account for emergeny purposes. Now we already have savings and we do quite well with savings. But the tempting thing here is that paying back this loan at a payment of $500 a year that comes out of your normal tax refund would be rather simple for us. Almost unnoticable really. So we could put that $7500 into an interest bearing account, pay no interest on the money whatsoever ourselves and prosper because of the front money the government is willing to give us just because we bought a house this year.
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Okay, that’s different. If the money was coming out of a tax refund, you wouldn’t miss it. And if you put it into an interest bearing account, you would be receiving interest on the entire amount from day one. Okay, in that case, I would do it.
Hmm now you have me thinking. We have credit cards debt that we woudl like to use this money to pay down. HOWEVER I wonder if it would make more sense to take the $7,500 – do the electrical work we need to do – and then put the remaining $5,000 in a high yield savings account (do those exist anymore!?!) and just keep paying down our cards on our own.
I think the “experts” would say to pay down credit with it. In any case it will be a help to us, and like you we will not really notice the payback out of future tax refunds.
Good luck!