Purchasing a home is likely to be one of the most thrilling experiences of your life. Intensely exciting, but also fraught with a tornado of paperwork and financial obstacles to overcome. One of the issues that may easily be overlooked amid the flurry of mortgage paperwork and closing costs is the need to set aside money for unexpected house repairs. Homebuyers rarely consider how much it will cost to own, operate, and maintain a house – and it can be a lot of money.
Homebuyers rarely think about how much it will cost to own, run, and repair a house after they have purchased it. They are particularly concerned about how much the mortgage, taxes, and insurance will cost, but if a homebuyer is on the verge of becoming unaffordable, purchasing a larger house with more maintenance and upkeep may push him or her over the brink financially. Consider establishing a home maintenance and repair fund in order to avoid this situation from occurring. However, how much money should you set aside for house repairs, and how will setting aside money for unexpected home repairs make your life as a homeowner easier?
How much?
When it comes to planning for unexpected house repairs, there are a handful of general guidelines that might be helpful. A decent rule of thumb is to save 10% of the total cost of your property taxes, mortgage, and insurance payments.“ This is most likely the bare minimum amount that you should budget for. If you make a combined tax, mortgage, and insurance payment of $,3000 per month, you should set aside an additional $300 per month for repairs and maintenance on your house. Having a home maintenance or repair fund can be really beneficial in that it alleviates the tension and concern that you would experience had you not had one. Imagine if your air conditioning suddenly packed up in the middle of summer and you needed to find the cash for a 24 Hour AC Service? Without an emergency fund, you could find it very difficult to scrape together the cash.
What about if your property is a new one?
When considering how much money you should set aside for home repairs, take the age of your house into consideration. If you own an older home, it is advised that you set aside a higher sum of money than the rules of thumb imply, particularly if you anticipate the need for repairs in the near future.
However, if you live in a newer home, do not think that you have a free pass from accumulating money for unexpected home repairs for the time being. It is true that homes require less maintenance in their first five years of ownership than later on. However, this is not true for all new homes, and new homes are not immune to accidents and weather damage, which may be covered by homeowners insurance but not in other cases.
Keep the money separate
The ideal location to put money aside for unexpected house repairs is in a savings account that has a high level of liquidity. When something happens, you are going to need to be able to get your hands on this money quickly and easily. Do not lock your money away in long-term bonds just because you think you will earn a little more interest that way. Find a bank account that is FDIC-insured and that provides the highest rate of interest you can find. It is more difficult to use your home repair and maintenance fund for an expense that is unrelated to its intended purpose if you keep it in a separate account.