How To Create A Realistic Home Repair Budget

Budgeting for these unavoidable expenditures is not always simple. One often-stated rule of thumb — saving 1% to 4% of your home's worth each year for maintenance and repairs — might cause sticker shock for homeowners when real estate prices rise.

According to Realtor.com, accredited financial counselor Kate Mielitz recently acquired a property in Olympia, Washington, where the median listing price is $540,000. Saving even 1% of that, or $5,400, would be difficult for many business owners, according to Mielitz, who works with low- to middle-income clients. Saving 4% equates to setting aside $21,600 each year.

"Just looking at that figure makes me want to cry," Mielitz adds.

The Cost Of A Home Is Determined By Its Age, Condition, And Location.

According to John Wessling, president of the American Society of Home Inspectors, "rules of thumb" have limited relevance because how much you spend typically depends on the age of your home, materials utilized, and local climatic trends, among other considerations.

In St. Louis, where Wessling resides, a laminated-shingle roof may endure 35 to 40 years. However, he believes it will only last 15 years under Florida's severe heat. Extreme weather events may also wreak havoc on dwellings.

Wessling believes that how well you keep your home may also have a significant influence. Many people don't notice if their window caulking dries out and separates, but the water that seeps in can do extensive damage.

"What may be a $12 or $15 repair could develop into a $15,000 or $20,000 repair to replace the wall below the window," Wessling explains.

According to the latest American Housing Survey performed by the U.S. Census Bureau, homeowners spent an average of $950 on house upkeep in 2019 — or 0.6% of the property's worth. However, the sums varied greatly depending on home size and age, among other considerations. For example, the percentage of a home's worth spent on upkeep increased from 0.2% in the 2010s to 0.8% in properties built before 1960.

Choosing How Much Money To Set Away

According to Mischa Fisher, chief economist at home services referral website Angi, people who choose to employ others can expect to pay more than do-it-yourselfers. According to Fisher, Angi's study of 2,934 homeowners who paid for house upgrades last year revealed that they spent an average of $3,018 on home upkeep. These sums were generally between 0.5% and 1% of their home's worth. In addition, the average homeowner spent $2,321 on emergency repairs.

Fisher advises homeowners to set away up to 5% of their income for house upkeep and $10,000 for emergency repairs and system replacements.

Another strategy is to save money depending on the remaining lifespan of your home's different components, such as the roof, heating and cooling systems, hot water heater, and appliances.

Wessling suggests looking online for charts and articles that estimate how long components generally survive. Similar searches can provide an estimate of replacement prices.

Wessling recommends hiring a home inspector to perform a home maintenance check. A maintenance inspection, like the examinations that precede a house purchase, may predict when certain home systems will need to be updated. Wessling claims that his inspection fees range between $400 and $500.

Assume you have a 5-year-old air conditioning system, which normally has a life expectancy of 15 to 20 years, according to Wessling. If a new system costs $4,000, you may save $400 every year to meet the expense. You may include a fudge factor to allow for future inflation, which is unpredictability. Wessling recommends adding 20% to the projected cost and saving an extra $100 each year.

Other Strategies To Budget For House Expenses

Consider establishing a home equity line of credit that you may use if repair costs surpass your savings. These credit lines are typically less expensive than numerous options, such as credit cards. Just be sure you can afford the payments; else, the lender may foreclose on your house.

People who are struggling to save money might consider purchasing a house warranty, which can cover repairs and replacements for a home's systems and appliances, according to Mielitz. Her current warranty is around $800 each year, with service visits to correct any problems costing $75 each.

Such contracts have drawbacks, such as the consumer having no influence over who makes the repair and what is covered depending on the policy's conditions. Consumer Reports advises customers to "self-insure" instead by depositing the money they would have spent on a house warranty into a savings account designated for home repairs and replacements.

However, Mielitz, who has purchased house warranties since 2008, claims that the contracts provide her with peace of mind at a reasonable price.

"It's similar to vehicle insurance." "Hopefully you won't need it, but if you do, you'll be prepared," Mielitz adds.

The State of Home Spending is based on an Angi study of 6,400 consumer surveys conducted between October 4 and 7, 2021. Home maintenance and repair expenditure statistics are based on answers from 2,934 homeowners and reflect a nationally representative sample of the home spending population.