Homeownership involves many expenses. Along with your mortgage payments, you’ll be paying property taxes, HOA fees, utilities, and insurance premiums. Another expense a lot of homebuyers underestimate is the cost of ongoing home maintenance and repair work. Here are some tips to help you set aside what you’ll need to keep your home in excellent condition over the years to come.
- Always set aside money every month. The standard recommendation is to try and save 1-2% of the purchase price of your home every year toward home repairs and maintenance. So, for example, say your house cost $300,000. 1-2% of that is $3,000-$6,000 every year. That comes out to anywhere from $250 to $500 per month. That is a pretty hefty amount, and the only way you’ll likely have what you need when repair time comes around is if you have been diligently setting it side every month. So, pick what seems like a suitable amount, and treat it like a monthly “bill” every month. Set it aside as if it is money you already spent. Then, try to forget it exists until you need it. One thing to keep in mind is that home values can rise and fall based on a variety of factors which may not always directly affect the cost of certain repairs. So, try to remember that your home’s purchase price is not the full picture. Maybe you bought your home for less than your neighbor down the street paid when they bought their identical home. Your repair costs will likely be similar, however.
- Put the money in a HYSA. Where should you put the money you are setting aside? A high yield savings account (HYSA) is an excellent option. If something does go wrong and you need a repair, you want the repair money to be easy to access. A HYSA is easy to withdraw from if you need to (unlike a CD account, for example). But at the time of this writing, HYSAs have competitive interest rates. So, keeping money in one is a great way to passively grow your funds a bit for extra maintenance and repair money.
- Do not remove money from your home repair fund at the end of the year. Home repairs happen unevenly over time. There are going to be some years where you do not have to spend all that much from your home repair fund. When you reach the end of such a year, you are possibly going to feel tempted to take that extra money and do something else with it. You might feel like putting it into investments, buying something expensive you’ve been wanting, etc. Try to leave it in your account for home repairs, however. Even though some years, your home may not need a lot of work, on other years, you can find yourself with repair bills adding up to tens of thousands of dollars. The key to being able to afford those massive repairs when you need them is to have money set aside from other years when you didn’t have to spend as much.
- Take care of small repairs before they become bigger jobs. If you notice an issue that needs attention, and you have the money to repair it, you’ll need to do some optimization math. If it can go longer without becoming more expensive to repair, then you can wait. And it makes sense to do that, because you are utilizing something for its full lifespan. That is cost-effective. But if waiting is going to cause the issue to become more extensive, or is going to lead to other complications which will also need to be fixed, you should act sooner than later. Otherwise, you are just going to end up spending more money in the long run. In some cases, it could be a lot more money.
Buy a Home in Indiana
Saving up for repairs and maintenance can feel daunting when you are new to homeownership. But by setting up a regular schedule for setting the funds aside, you make it more likely you’ll be ready when a major repair needs to be done. If you need budgeting advice, talking to people who own homes similar to yours may give you some insights.
Grandview Lending is based in Indianapolis, and can help you buy a home anywhere in Indiana. To get started, please call us at (317) 255- 0062 to schedule your consultation.
