There are a lot of costs involved in homeownership that you probably have thought of. You likely have factored in your down payment, expected monthly mortgage amount and interest, closing costs, and property taxes. But one thing you may not have thought about is how much you will be spending on home maintenance. How do you budget for this expense when you are shopping for a home?
Budgeting for Upcoming Home Maintenance Costs
Let’s break this discussion down by talking first about the short term, and then about the long term.
Chances are good that when you buy your home, it will not be in perfect condition. It may have some problems that you will need to deal with not long after moving in. The home inspection should help you catch most of these, but a few may slip through that you didn’t see coming.
Add up the costs for all of the issues you identify in the home inspection. Do not tell yourself you will just “deal with these later”—some of them may become urgent faster than you think.
Come up with a realistic timeline for dealing with these repairs. Try to determine how much you will be able to cover from future income, and how much you need to set aside from your savings now. While you are at it, do not forget about upgrades you want to make during the first couple of years!
Assume there are issues the home inspector did not spot that will present themselves during the initial years you live in your home.
To estimate what you will need for these, you could base your guess off of the guidelines below for estimating your long term home maintenance costs.
Budgeting for Future Home Maintenance Costs
Once you have caught up on any initial repair work that you need to do after buying your home, it should be easier to keep up with future maintenance needs.How much will you need to spend to keep up your home? The size of your home, its features, and its overall condition will all have an impact, as might your location.
But we can look at averages and rules of thumb to get some possible general estimates, just so you have a ballpark number in mind.
Discover says, “According to the one percent rule, you should set aside at least one percent of your home’s value every year for home maintenance. For a $360,000 house, this works out to $3,600 per year, or $300 per month.” You can also take a look at some research conducted by HomeAdvisor. The site reports based on 2020 survey data, “The average household spending on home services rose to $13,138 … Breaking down spending further across three key categories, home improvement spending was $8,305, home maintenance spending was $3,192 and home emergency spending was $1,640.
Based on the home you want to buy, your vision for it, its condition, and your budget, you can probably figure out how this type of breakdown might be the same or different for you. For example, you might be prioritizing home improvements, just like the homeowners in the survey. On the other hand, maybe you are happy with the home more or less as it is, and will focus more on just maintaining and repairing it as needed. In that case, your overall home expenses could be significantly lower each year.
If you are not used to maintaining or improving a home, you might want to do some research to find out what average prices are for some of the home upgrades you might be thinking of making. Also, be aware that your DIY skills (or motivation to learn) can significantly impact your home repair and upgrade costs. If you are able to do a lot of home maintenance and improvement work yourself, you can save.
We Can Answer Your Questions About Budgeting for Your New Home
Do you need help accounting for home maintenance when you figure out how much home you can afford? First Residential Mortgage can discuss this with you during your consultation, as well as answer your questions about other aspects of budgeting for a home. Call us today at (540) 838-5868!
