When property owners establish a budget, they include items such as their mortgage, utilities, and property taxes. If they are new to owning a home, they often neglect to add other costs to the budget. Men and women who do account for these expenses frequently underestimate them. They no longer have a landlord or property maintenance firm they can call when something breaks or must be replaced and are shocked to see how much these items cost. 

People can easily avoid this problem by including a line in their monthly budget for household repairs, maintenance, and replacement costs. How much should they set aside for these costs? People may use the one-percent rule of thumb, but this method isn’t appropriate for all. Another option involves using the square-footage method. Regardless of which technique a person decides to use, they may need to fine tune the calculations to get the projected amount close to its actual amount. 

Men and women may wish to consider budgeting for a home warranty to keep repair and replacement costs under control. Owners choose from a variety of plans, depending on the level of coverage they desire. All warranties help to reduce the burden of budgeting for ownership costs, so it’s an option every person should consider.¬†

Key Points

Individuals may choose to use the one-percent rule of thumb, which states a homeowner should save one percent of the purchase price or home’s value to pay for repairs, maintenance, and replacement costs. Other men and women decide to use the square-footage rule, which determines the amount to budget for these expenses based on the size of the home. 

Factors to take into consideration regardless of which method a person uses include the condition of the home and its age. A person might find they don’t have enough in their budget even when using one of these methods or budgeting more than they truly needed. Maintenance costs differ from emergency repair costs, but a home warranty helps to keep both types of expenses under control. 

The Rule of Thumb

Homeowners who don’t know where to start when establishing a budget for home maintenance and repairs may wish to use the rule-of-thumb method. Individuals who do so find they tend to remain pretty close to the budgeted amount when it comes to home repairs and replacement costs. In fact, HomeAdvisor and Angi report this method tends to be pretty accurate, although the homeowner must still take into account the age of their home, its condition, and its location. 

Men and women who choose to use this method find one percent is the minimum bar and works best when used with a newer home that is built with modern, durable materials. Furthermore, the location of the home plays a role in how much to budget for these expenses. This rule of thumb works best when the home is located in a dry and temperate climate. 

Nevertheless, some experts disagree with the one-percent rule of thumb. They believe this method is of benefit but recommend homeowners set aside more each month for repairs and replacement costs. The older the home, the higher the percentage needs to be, as older homes require more repairs and have more items that will likely need replacement in the near future. 

These experts recommend setting aside up to four percent of the home’s cost for repairs and replacement costs. For instance, an older home in the Pacific Northwest, where the climate remains wet, will likely have higher upkeep costs and require significantly more repairs. Newer homes built in Arizona, where the climate is dry throughout the year, likely will benefit from the one-percent rule of thumb. 

The Square-Footage Method

Homeowners may not feel comfortable using the one percent rule of thumb method and want to know more about alternative techniques they can use to budget for home repairs and replacement costs. Another option involves budgeting one dollar for each square foot of the home for repairs and replacement costs each year. While this method does work, it isn’t as accurate as the rule-of-thumb method. For instance, it doesn’t account for labor costs associated with these tasks. 

Labor costs vary greatly by the home’s location. The person must account for this when establishing their budget. Porch, a home improvement review website in America, reports Connecticut, Maryland, New Jersey, and Washington, D.C. have the highest labor costs for home repair services. In contrast, Arkansas, Mississippi, and West Virginia have the lowest labor rates for home repair services. 

Materials present in the home also factor into the repair costs. High-end finishes and appliances result in higher maintenance costs regardless of the home’s size. Homeowners need to factor this into the budgeting process to ensure they don’t come up short when it is time to repair or replace something in the home. 

Repair Frequency

Porch recommends homeowners take into consideration how often things in the home will need repair or replacement when creating a budget. Materials play a large role in the amount to budget for these expenses. 

Roofs will need replacement within 12 to 75 years, depending on the material used. Composite shingles need replacement sooner than many other roofing materials. Most homeowners find the maximum lifespan for a composition shingle roof is 20 years, while metal roofs last up to 75 years. Asphalt and wood shingles last anywhere from 15 to 30 years, while rubber roofs often don’t need to be replaced for 50 years, although some roofs made of this material must be replaced after only 30 years. 

Paint costs also vary by the material used to construct the home. Climate also plays a role in how often the exterior of the home must be repainted. Wood siding must be repainted every three to seven years, depending on the location of the home and the climate in the area. Stained wood siding needs to be repainted every four years. Aluminum siding and stucco typically need repainting every five years, while fiber cement homes can go ten to 15 years before they need to be painted again. Brick homes, on the other hand, can go 15 to 20 years between painting sessions. 

Traditional tank water heaters only last eight to 12 years on average. Homeowners must take this into account and budget for a replacement so they aren’t without hot water. Tankless water heaters typically last 20 to 25 years, and a homeowner might want to consider this option when the time comes to replace their conventional tank water heater. 

Fine Tuning the Budget

Once a homeowner establishes a budget for home repair and replacement costs, they need to customize the number based on several factors. This step requires the homeowner to consider what could go wrong with major systems in the home, such as the plumbing or HVAC system. This task has become more important in recent months, as the global pandemic of 2020 led to people spending more time at home. Their presence in the residence has led to more wear and tear on home appliances and systems, and the budget needs to take this information into account. 

Furthermore, the age of the home plays a role in the amount to budget for repair and replacement costs. A homeowner should budget three percent or more of the home’s value for these costs if the home is 30 years of age or older and is located in an area with a stormy, humid, or wet climate. In addition, they should budget this amount if the home was built with wood siding and composition shingle roofing materials. 

Set aside two percent of the home’s purchase price or value if the home is 10 to 20 years old and located in a moderate climate. The same holds when the home was constructed using medium-quality materials, such as rubber roofing or stucco siding. Homeowners only need to budget one percent when the home is less than ten years old and was built using modern materials such as metal roofing and fiber-cement siding. Mild, dry, and temperate climates lead to the need for fewer repairs as well. 

Planning for Home Maintenance

Every homeowner must plan to maintain the home. Doing so and keeping an eye on the structure’s condition helps to keep repair and replacement costs under control. For example, cleaning the gutters regularly and replacing HVAC filters on a schedule helps to prevent damage to the foundation or costly HVAC system repairs. Any leak in the home needs to be addressed promptly, and homeowners should examine the foundation of the home every time they do yard work. These simple steps allow problems to be detected early, which keeps repair and replacement costs under control. 

Home warranties serve as a contract between the warranty provider and the homeowner. They cover costs associated with repairing or replacing key systems and appliances in the home, depending on the level of coverage selected. Consider purchasing a warranty when purchasing a new home. If you already have a residence, it never hurts to look into making this purchase. Doing so helps to keep ownership costs down while ensuring you have someone you trust to call when something goes wrong in the home. The peace of mind a homeowner gets when they have a home warranty is priceless.