Why it may be worthwhile to spend your tax refund on your home

It’s tax season – and for many consumers, the time of year when they hope for a refund from the SA Revenue Service that will give their budgets a Summer boost.

“And getting money back from SARS is always a cause for celebration,” says Gerhard Kotzé, MD of the RealNet estate agency group, “so it is really tempting to spend it on “spoiling’ yourself or your family with a great outing, a holiday or maybe some new ‘bling’.

“But for homeowners, it makes more sense to invest any tax refund in your home and leverage further savings, even if this doesn’t seem very exciting right now.”

He says that the first thing homeowners should consider doing with a tax refund is to use it lower the capital portion of their home loan, because this could help them save thousands of rands in interest charges over the life of the loan – especially if they make a habit of doing it every year.

“If you had a 20-year home loan of R1m at 7% interest, for example, just one extra lump sum payment of R2400 this year would cut the loan term by a month and save you almost R7600 worth of interest.”

As a homeowner you may, however, want to spend your tax windfall to help fund something more immediately enjoyable. In this case, says Kotzé, good choices include:

• A second bathroom to make life easier now and lift the value of your home when it is time to sell;
• A new coat of paint that will keep your future maintenance costs down;
• Improvements to your security system that will lower your short-term insurance premiums; and
• Roof insulation to help keep your electricity bills down.

He says that rising municipal service charges may also prompt homeowners to use any tax refund this year to help make some other changes relating to electricity and water consumption. These could include:

• Switching to long-lasting and low-power LED lighting and bulbs wherever possible;
• Installing tap and shower aerators and low-flow toilets;
• Replacing an old power-guzzling fridge or washing machine with an energy-star rated appliance that uses much less electricity; and
• Installing a water storage tank to save all the rainwater that runs off the roof and cut their consumption of municipal water.

“Or if you feel you really should ‘splurge’ on something new, why not consider a solar geyser or a few photo-voltaic panels so that you can start converting your home to run on free energy?”

BUSINESS REPORT