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