How Much of Your Monthly Income Should Be Set Aside for Repairs When Buying a Home?

Do-it-yourself home repair can save homeowners valuable money.

Owning a home can be an expensive investment to undertake. It often involves far more than just paying the mortgage and insurance on a monthly basis. Homes deteriorate throughout the lifetime of the homeowner and can require costly repairs. The amount that a homeowner needs to set aside for such repairs will vary. Factors such as the home's value, its condition at the time of purchase, and the income of the homeowner can all factor into the equation.

Budgeting

One way to determine how much of your monthly budget should be set aside for home repairs is to sit down and determine how much additional cash flow you have in addition to all of your other expenses. A homeowner who lives month-to-month with little additional extra capital may not be able to put away nearly as much as someone who comes out ahead several hundreds or thousands of dollars every month. Mint.com and Extension.org both indicate that industry experts generally recommend about 1 to 3 percent of the home's value on an annual basis. Therefore, a $100,000 home would require about $1,000 per year or about $83 to $250 per month. Find a figure between these two numbers that you can reasonably fit within your budget.

Anticipating Repairs

Homeowners who pay careful attention to the state of their home can anticipate future repairs and create a budget for those repairs in advance. Rather than predetermining how much monthly income to set aside for the home, instead you can create a list of the repairs you anticipate needing to do throughout the year. This should include any major or minor renovation projects. Estimate the cost of each project and determine a total budget for the year and for each month by dividing the yearly total by 12 months.

Set Amount

Another way to determine how much you should set aside each month for home ownership repairs is to simply come up with an amount that is comfortably within your budget. This method can be effective so long as you don't dip into the money for other things once you reach the year mark in your budgeting. For example, if you can only reasonably put away $50 per month for home repairs and don't have to use the money in the first two years of homeownership, you will have $1,200 set aside after two years. Keep carrying your budget over from year to year so that you have enough set aside for more costly repairs in the future.

Home Warranties

Another way to effectively budget for home repairs is to put aside a nominal amount each month by purchasing a homeowner's warranty. These warranty programs generally require a premium of around $50 or so per month, but the amount can vary based on the type of coverage you elect to have. When it comes time to complete repairs around the house, such as a broken down dishwasher or clothes dryer, a homeowner's warranty usually requires that you only pay a deductible towards the cost of the repair. So, the money you have been putting into your premiums effectively covers the cost of the repair, once you meet your deductible. The deductibles are usually about the same cost as the premium, but vary from warranty company to warranty company.

References

• Extension.org: How Much Money Should Homeowners Set Aside Each Year for Maintenance and Repairs to Their Home?
• Consumer Credit Counseling Service of South Texas: Homeowners Urged to Budget for Maintenance Costs
• Mint Life: Budgeting for Home Maintenance and Repair Costs
• Prudential: How Much Money Should I Have Set Aside for Emergencies?
• Win Home Inspection: The Cost of Ownership: Home Repair and Replacement Costs