How to Budget for Maintenance and Repairs
Buying a home is a big expense, but the expense doesn’t stop at the down payment and purchase costs. If you’re in the process of buying a home and calculating your mortgage payments and budget, make sure you budget for maintenance and repairs.
New homeowners may find this part tricky; how do you budget for maintenance and repairs if you’ve never owned a home? Maintenance budgets tend to follow a few tried-and-true rules, so you can successfully budget for a home even if you’ve never done it before.
Budget 1% of your home’s purchase price per year
The general rule for budgeting for maintenance and repairs is to budget up to 1% of your home’s purchase price per year. For example, if you purchase a $200,000 home, you should budget $2,000 per year for maintenance and repairs. Put this money aside in a separate savings account; don’t mix it up with your primary savings, and put it aside no matter what.
A home repair budget is a variable thing. While you may not spend $2,000 per year repairing and maintaining your home in the beginning, you might find yourself spending $10,000 on a new roof at some point, which would require five years’ budget to offset. Therefore, even if you find you’re not spending 1% per year, save it, because you’ll need it eventually.
Have access to emergency funds
Sometimes it seems like home repairs happen at the most inconvenient times. You might not have enough saved in your home maintenance budget to handle emergency repairs, so make sure you have access to emergency funds for unexpected repairs. This might be a primary savings account, or even credit cards, although that’s a last resort. You can also use a home equity line of credit to pay for emergency repairs, although again that’s a last resort.
