How Much Should You Save for Home Maintenance and Repairs?

How Much Should You Save for Home Maintenance and Repairs?

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How do you plan for home maintenance?

To plan for home maintenance, keep a close eye on the condition of your home. For example, clean out your gutters regularly and replace your HVAC system filters when dirty. Look for leaks around toilets and sinks and inspect the outside of your home, including the foundation, so see if any cracks or other issues are starting. If you're uncertain of what to do or what condition your home is in, it never hurts to consult a professional.

What home maintenance and repairs should you plan for?

Before planning a budget for home maintenance and repairs, it's important to first know what that entails. When renting, the landlord or maintenance company is responsible for fixing most of what gets broken, so, if you've had something like a kitchen appliance break, you may not have considered the cost. However, if your dishwasher breaks in the home you own, you're going to be the one paying the bill to fix or replace it—and you'll be kicking yourself if it broke because you neglected to clean the dishwasher filter. Homeowners should be fully aware of the routine maintenance needed to keep everything running. "Routine maintenance and upkeep can help you save a ton of money and stress," says Andrea Collins, home insights expert at Hippo.

There's a lot to keep track of, so it helps to reference a checklist, like this one from Hippo, that breaks down home maintenance into monthly, seasonal, and annual tasks. This includes everything from cleaning out the dryer vent on a monthly basis to draining and refilling hot water heaters each year. Many of these tasks take less than 20 minutes, and you can do them yourself without spending any money—and they'll save you money by preventing costly repairs in the future.

Collins also emphasized the importance of season-specific maintenance and preparing for weather-related damages, no matter where you live. In the past year, she says homeowners were commonly dealing with cold-weather issues like broken or frozen pipes, ice dams on roofs, and water leaks—and these issues aren't cheap. According to the Insurance Information Institute, about one in 50 homeowners will file a water damage or freezing claim (which costs about $11,000, on average), accounting for almost 24 percent of all homeowners insurance claims. So don't shrug off the importance of routine maintenance—your home and your bank account will thank you later.

Broken Windows

Broken windows are more than unsightly — they’re dangerous. Broken glass can result in serious injury and leave your home exposed to the elements. Another issue is home security. A broken window is an open invitation to a burglar looking for easy access to a home.

If you discover a broken window in your home, take care of it immediately. The cost for this repair? According to Home Advisor’s 2021 True Cost Guide, broken glass repair runs around $350 depending on the type of glass, window and your location. If you need a new window pane, expect to pay between $100 and $700; the national average is $275.

Water Heater Problems

Likewise, we probably don’t need to tell you how much of an inconvenience it is if your water heater shuts down. Cold shower, anyone?

Numerous issues can plague your water heater — faulty valves, broken heating elements or thermostats, corrosion, sediment buildup. That results not only in cold water, but also leaks, rust and bizarre knocking sounds that definitely should not be coming from an appliance. Leaks are especially urgent because of the potential damage to your home. If your water heater starts leaking, take care of it right away.

First, turn off your water at the main shutoff valve, then cut the power to the appropriate circuit or turn off the gas supply. At this point, you can start the troubleshooting. The cost to repair will vary depending on the problem. The average? $575. If you need a new water heater, expect to spend between $750 and $1,300.

Vacant Land

Vacant land is typically the cheapest and easiest type of property to maintain. It’s one of the reasons sophisticated individuals and wealthy families like it as an investment. If it’s more rural, then you may not have to deal with any code enforcement inspectors or rules. You don’t have to worry about how long the grass gets or if trees are blown over by a storm.

The property taxes are typically far lower too. Put a cow on it, and you may even qualify it as agricultural and get an even deeper discount on taxes. Just remember to feed the cow and you may get away with having a mobile tiny home on it, without triggering extra taxes and fees.

Tip 3: Budget for home improvements

In addition to ongoing maintenance and repairs, you’ll probably want to make improvements to your home over time, such as new carpets, kitchen counters, or windows. You may want to make improvements to your landscape as well. These improvements can make your home more enjoyable and attractive.

The Average Single-Family Home

The average single family home will require basic hazard insurance, regular lawn care (snow removal in cold climates), property taxes, and basic repairs and updates. Remember that everything is constantly aging and depreciating. The appliances, pool pump, roof, plumbing, wiring, foundation, etc. Eventually, you will have to fix it or replace it. You may not incur all those costs in one year, but you should be setting aside enough in advance to cover them when they do come up.

According to Go Banking Rates, the average annual cost for maintaining a home is $1,204. This includes maintenance, insurance, HOA fees, utility bills, and more.

How To Use the Home Maintenance Budgeting Rule of Thumb

Many homeowners have no idea how much they need to budget for home repairs. This rule of thumb is just a guide. However, it’s not foolproof. There’s also another budgeting guide for upkeep expenses that you may find helpful.

The 1% Rule

If you’re using the 1% rule of thumb, you should budget at least 1% of the home’s purchase price for maintenance expenses. So, if you purchased a $250,000 home, you should budget a minimum of $2,500 for upkeep and repairs using this rule. But is that enough? 

Elizabeth Dodson, co-founder of digital home management company HomeZada, doesn’t think so. Dodson explained that owners should set aside 1% to 4% of their home’s value, depending on the property's age. Older properties are likely to need more repairs.

Porch Group’s Anderson agreed that this fund should be higher than 1%, saying 1% to 3% is more prudent.  “The annual maintenance costs for any particular home will vary, based on when the home was built, the materials and finishes used, and climate where the home is located,” he said.  For example, if you have an older, wood home with wood finishes and live in a wet climate like the Pacific Northwest, Anderson believes your upkeep costs would be closer to 3% of the home’s value.

“By contrast, a newer home built with concrete and stucco finishes, located in a dry climate like Arizona, will likely come in on the lower end of the range near 1%,” he said. 

The Square-Footage Rule

An alternative to the 1% rule is the square-footage rule, which dictates putting away $1 per square foot of your home for annual repairs. However, neither Anderson nor Dodson believes this is the best budgeting gauge. 

“A fixed price per square foot glosses over some of the most important factors in home maintenance costs, like labor costs for home services,” Anderson said.  For example, he explained that a homeowner who needs to replace the roof on a 2,000-square-foot home would pay two to three times more to do so in urban San Francisco than in rural Oklahoma.

Home-maintenance and repair labor costs vary with the cost of living across the U.S., so your budget should reflect your area’s rates.

According to Porch’s data, average repair estimates are the highest in New Jersey; Washington, D.C.; Connecticut; and Maryland. These costs are the lowest in Mississippi, West Virginia, and Arkansas. 

Another difference involves the type of home you have. If it has high-end finishes and appliances, Anderson said maintenance costs would be higher than for another house with lower-end finishes and appliances, even if the two homes were similar in size.  

FAQ About Home Maintenance Costs

1. What is a home warranty?

A home warranty helps cover the cost of things that homeowners insurance doesn’t cover. The typical home warranty pays in part for repairs and replacements of a home’s major components, such as: — HVAC systemsPlumbingElectrical Appliances Your home warranty would be a contract between you and a home warranty company.   According to Investopedia, a home warranty comes with an annual premium of several hundred dollars and a service call fee of about $75 to $125 every time you request service from a contractor.

2. What does homeowners insurance cover?

Homeowners insurance can cover many different things, all depending on the specific policy you sign up for.   Here are some examples of what homeowners insurance can help pay for (provided the deductible is met): — Structural repairs as a result of fire, wind, lightning, hail, or other natural disastersReplacing personal property inside the home that gets stolen or damagedMedical and legal expenses if someone gets hurt while in your home or on your property Homeowners insurance does NOT cover routine maintenance and repairs. 

3. How do you find a good contractor for home maintenance and repairs? Letting a stranger into your home can be nerve-wracking, and you want to make sure you find a contractor you can trust. Here are some tips to follow when you’re looking for a new plumber, electrician, handyman, etc: — Get quotes from at least three different contractors in your area for price comparison — Look for positive reviews on third-party sites (such as Google or Nextdoor) instead of on the company’s own website — Ask for proof of up-to-date licenses — Make sure the contractor has insurance — Look for longevity. If possible, choose a company that has been in business for 10+ years 

About the Author

Christy Bieber Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.

How to prevent unexpected repairs

Aside from doing routine maintenance when you're in a home, one of the best ways to prevent unexpected repairs is to get a proper home inspection done before you ever close the deal on a new house. While the seller will often have an inspection done, Collins recommends that buyers also hire their own inspector to be really clear about the condition of the home.

"A lot of times homeowners focus much more on the surface-level items and cosmetics, and what you really need an inspector to do is to understand what's underneath the cosmetic items," she says. "Major foundational issues, inner wall issues, like major structural issues, are by far the most important thing for an inspector to catch and for a new homeowner to see, because [buyers] aren't going to see inside the walls."

And inspection can also help you be more aware of the timeline for when you'll need a repair and how much time you have to save for it. "You need to be aware when you're buying the house, which of these items are near being needed and factor that into your purchase," Scott says. "So if you have an inspection and the inspector says the roof only has two years left, well, maybe that's time—if you don't have the cash reserves, maybe before you close—to negotiate with the seller."

In this case, Scott says the buyer could go to the seller and ask them to put money in escrow to essentially pay for the new roof, saying, 'Let's put it in the contract that I'm going to pay you $10,000 more, or we're going to subtract $10,000 off the purchase price.' Then, when the roof needs replaced in a couple of years, the buyer can use that money to pay for it.

"The key isn't necessarily to avoid those costs, and the key isn't to save up all the moneyreally quickly," Scott says. "The key is to anticipate it and have a plan."

More Ways to Save: Routine Maintenance

In addition to budgeting and saving money so that unforeseen home repairs and replacements don’t cause a financial strain, you can take steps to help your systems and appliances retain their value.  

According to WiseBread.com, a little basic maintenance can help you maximize the life expectancy and resale value of some of your home appliances, such as your washer, dryer, and refrigerator.  Even regularly changing your heating and air conditioning filters can help your systems run more efficiently (and potentially help you save money on energy bills). Staying on top of routine maintenance and catching up on any delayed maintenance can help you minimize the necessity for potential household repairs.

Related: 3 Simple Ways to Cut Electricity Bill

Another approach to fiscal planning for anticipating home repair and replacement expenses is to consider purchasing an American Home Shield Home Warranty. A home warranty is a service agreement, usually for one year, that covers the repair or replacement of many major home system components and appliances that typically break down over time due to normal wear and tear. Different from home insurance coverage, a home warranty helps protect a homeowner’s budget from the costs of unexpected, covered breakdowns or repairs while home insurance generally provides coverage for the structure and personal belongings inside the home in the case of catastrophic events.

While specific coverage varies according to individual home warranty plans, major home systems like the furnace, central air unit, electric, plumbing, and water heater are often included. Some plans may also cover common household appliances like the refrigerator, washer, dryer, dishwasher and oven.  You also may be able to add optional coverage for items like a pool, spa, or guest unit.  It’s important to read and understand specific home warranty contract terms before you sign up so that you know in advance exactly what items are covered and what to expect when a breakdown occurs.

With most home warranties, you sign a contract and pay an annual or monthly fee for the coverage period, which is usually a year.  This type of coverage may be helpful because, when a covered item breaks down within contract terms, the only additional payment required by many warranties (in addition to the contract price) is a pre-determined service call fee or trade service call fee for each contractor that is needed to complete a covered repair or replacement.  This arrangement can help you protect your budget by knowing in advance that you won’t have to pay more than the the annual price of the home warranty plus the service call fee for covered malfunctions.

Regardless of how much you save for home repairs or whether you choose to protect your budget with a sensible home warranty, the important thing is to have a plan for covering the expenses of unanticipated home system and appliance breakdowns. 

Having a plan in place and money in the bank will help lessen the stress when a major system or appliance fails. Setting aside money for such events will also lessen the possibility that you’ll incur credit card debt and associated interest payments just to get your household up and running properly again.

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