How Much Money Should be Saved for Home Repairs and Maintenance?

I remember when looking for my first home, a condo, and never giving a second thought to potential home repairs.  The building was new

Home repairs don't have to break the bank

construction, so I didn’t think of the need to do future work.

While that did end up being the case, things are vastly different when buys an older home.  In particular, an existing single-family home can require more work and money than the new condo example.  This is something that might only be given a passing thought by new homebuyers, but should really be given much more attention and consideration.  The practice of saving for home repairs is important indeed.

Why do we need to save for repairs and maintenance?

A first-time homebuyer, particularly one buying a pre-existing house, should think carefully about such expenses.  Additionally, one must always remember that the difference between apartment expenses and homeowner expenses is not just the rent payment versus the mortgage payment!

The reality is that stuff happens with houses.  You can’t just call the landlord or management company to fix a problem. Rather, you’re responsible.  The scope of things for which one becomes can vary depending on the type and age of home.  That being said, here is a small sampling of the types of bigger expenses that might come up:

  • Roof repairs or replacement
  • Siding
  • Gutters
  • Air conditioning
  • Carpeting/flooring
  • Plumbing

Things happen. Often they can be unexpected (plumbing, in my experience) or planned (carpeting).  Some expenses can be minor, other can be large.  Thus, while home repair costs can be irregular in nature, they do add up overall.

How much to budget for home repairs and maintenance?

Well, that again depends on the type and age of the home.  In general, I think that it’s a decent framework to view the home’s value as a starting point on which to base a budget. Then, taking 1.5% (as an average) of the home’s value and saving it each year for home repairs and maintenance is a general guideline that seems to work.  Again, with expenses being irregular, this is an average cost. Some years more, some years less. Money not spent in one year can be saved for future expenses.

Translating this into a budgeted monthly amount for home repairs, let’s take the following example:

Home Value: $200,000

Average annual repair budget: $3,000

Monthly budget: $250

My Questions for You

What do you think of the 1.5% figure for home repair savings?

Do you budget regularly for home repairs, and set money aside accordingly?

Do you agree that many first-time buyers don’t spend enough time thinking about these ongoing costs?

Comments

    • Squirrelers says

      Michelle – yeah, I think many folks simply don’t think of these things. Lack of experience, and an overabundance of enthusiasm! Of course, enthusiasm is a good thing normally, just needs to be balanced with realism too…

  1. says

    I’ve heard 1-2% is about right. Obviously the more you put away the more you’ll be able to do the required stuff and also can maybe fund some non-essential upgrades to keep your home looking current. Right now our home repair fund is going toward a new roof which we will need next year.

    • Squirrelers says

      Money Beagle – true, the required stuff comes first, and realistically people will want to do some updates as well. At some point, they move from being wants to somewhere between wants and needs.

    • Sarah says

      I heard its best to save (per year) 3% of the value of the home if the home is newer, and 5% if the home is older – however, 5% is also a minimal down payment on a home, so it seems a little steep, but, with that amount you’ll definitely have security if something falls apart.

  2. says

    I do think a lot of people don’t consider them. I currently have a remodel and repairs fund for my house. If something goes above that cost then I will have to dip in my emergency fund. My repair/remodel fund is pretty generous though so unless something crazy happens I should have it covered.

  3. says

    “Do you agree that many first-time buyers don’t spend enough time thinking about these ongoing costs?” I am a first time home buyer (we close in a month) and we definitely took this into consideration. The main thing we like about our house is that it has a new roof, new siding, new furnace, new water heater, and new ac unit. We plan on saving each month for home repairs, as you suggested. I can’t speak for everyone but we have definitely had this on our mind from the beginning.

  4. says

    This is an interesting analysis. I have a condo, rather than a house, so my repair budget has been much different. New vs. old homes and other factors must be taken into account rather than using a fixed 1.5% rule. However, for new home buyers it could be a good place to start and they can adjust over time.

    • Squirrelers says

      Eric – yeah, a condo would be different. Assessments should take care of such expenses. Though updating and some interior repairs would still require funding.

  5. says

    I don’t set aside a specific amount, but rather, always keep an emergency fund with $5-$10K for anything that comes our way. A roof, HVAC or any number of single things could go one month and boom – gone! So, have to always have several thousand on hand at any given time.

  6. says

    I’m not a big fan of the percentage of home value; although I know it’s popular. I have a 3,800 square foot home that, base on a percentage would be a mere $900 a year. Personally, I like to plan out the big expenses and add up the monthly savings needed. Roof – every 20 years, water heater – every 10 etc.

    • Squirrelers says

      JP – if one could do line item estimates, and truly hold to it, that could be even more accurate. I agree. That being said, for those not inclined to do such analysis, the % of home value is a quick way to force onself to set aside a decent amount regularly.

    • Kay says

      JP- I was just going to say something like this. I think that the 1-3% rule can work in areas where the housing market is average, but we just bought our first home- over 2,000 square feet- for $86,000. Since it was built in 1920, it would just be unreasonable to think that $71 per month would be able to cover the expenses of maintenance on a house that old, even though it does have new siding, roof, furnace, AC, etc. We plan on putting a few hundred dollars a month into an account for repairs and improvements.

  7. says

    Great thoughts here – I’ve been doing a lot of home upgrades lately, and now that my needs have slowed down (slightly) I’ve been kind of wonder how much I should be saving for home repairs that are essentially emergencies, as well as ones that are planned. This 1.5% metric looks to be pretty good at hand, but of course i’ll look at my numbers and see how that reflects what I believe I’ll need to spend in the future.

    • Squirrelers says

      Jeff – I think the 1.5% can serve as a guide and an estimate. Things can go up and down in terms of cash outflow by month/year. In terms of what you mentioned, I do think that it’s great to save for future repairs that are both emergencies and planned, even while current needs might be lower.

  8. says

    A while back, we wrote down all the items in the house and how long we thought they would last. Carpet, furnace, roof, refrigerator, …everything we could think of replacing. The sum of replacement costs divided by usable life should give you a pretty accurate average cost per year. It turned out to be a large number!

  9. Writeone says

    I’m a first time homeowner. We save $100/mo as recommended by the realtor. I did think to ask about that and plan for it.

    Now, I’m wondering what exactly is considered a home maintenance item. Repairs of course, but what about carpet cleaning?

    Also, I’m confused about using the home value as a guide as the market fluctuates so much. We paid $155,500; now the home value is maybe $50K. It’s about 950 HSF and about 1,300 total SF. We also had a portable 10 x16 work shop installed about 3 years ago.

    Does $100 / mo seem reasonable? Do services like carpet cleaning, grout repair, AC servicing all fall under that fund category? Or is the fund for major things only like appliances, roof, AC repair / replacement, plumbing repairs only, and electrical system?

  10. JP Cubs Win! says

    Does the 1.5% cover home repairs/maintenance only? Or home repairs/maintenance AND home appliance repairs/maintenance?

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