Buying a home is exciting, but can be very stressful. Especially for first-time homeowners, you have to consider all the recurring monthly costs that you will be responsible for.
From your mortgage and insurance to property tax and utilities, there are a lot of expenses that you might not be prepared for. One expense, in particular, that is often ignored is setting aside a budget for home repairs.
In order to preserve the value of your home and continue to live comfortably, you need to be prepared to cover expenses resulting from broken appliances or structural damage to your home. This could include anything from a damaged roof to a leaking water heater.
It can be difficult, though, to know how much to set aside for these unforeseen expenses. Consider these factors when trying to set up an adequate home repair budget.
Maintenance vs. Improvements
First and foremost, you should acknowledge the difference between making repairs and making improvements to your home. Making sure your roof is protected and that your appliances are in working order are necessities. Replacing your kitchen cabinets is not.
Of course, this doesn’t mean that you can’t set aside money for renovations, but these should be two different budgets. Maintenance should be prioritized over renovations.
The easiest way to set up an adequate budget for home repairs is to set aside a percentage of the assessed value of your home. It’s commonly recommended that you set aside anywhere from 1% to 4% of your home’s assessed value for maintenance costs.
If your home is older and is likely to need more repairs or your home is very expensive, you should probably lean closer to 4%. However, for newer or cheaper homes, it’s probably safe to skew closer towards 1%.
This strategy, while very easy, is not always completely effective as your home’s assessed value is just an estimate. However, it is a great way to ensure that you’ll likely at least be able to cover most maintenance costs.
Alternatively, if you prefer to err on the side of caution, you could create a budget for home repairs by making a list which details the costs of any potential repairs that you might need to take care of.
Your list should cover everything from roof repairs to fixing your washing machine. Additionally, you should be sure to consider the cost of repair and installation services in the case that you are not able to repair something yourself.
Once you’ve created your list, you can estimate how much you need to save on a monthly basis in order to cover the annual cost of maintaining all of the items on your list.
Creating a home repair budget is often an overlooked expense for new homeowners. However, maintenance should always be a priority in order to ensure the safety and comfort of you and your family. Using one of the methods listed above, you should be able to create an adequate budget to cover any potential maintenance expenses that might arise over time.