How to Budget for Major Home Repairs Without the Stress -

Say it with me…

Major home repairs won’t happen to me.

Yeah, thought so.

82% of homeowners dealt with surprise repairs in 2023. That’s up nearly double from the year prior. And guess what…

About half of those spent over $5,000.

If you’re not prepared, water damage can ruin your life…

But it doesn’t have to be that way. Budgeting for large home repairs is pretty simple when you know how. Let’s dive into how you can set money aside so you’ll never have to worry about an emergency repair again.

What You’ll Learn

The Hidden Cost of Homeownership
Fund #1: Your Regular Maintenance Fund
Fund #2: Your Emergency Repair Fund
Plan Ahead For Large Home Components
Bonus: Preventative Maintenance Is Cheaper
Options When You Don’t Have Enough

The Hidden Cost of Homeownership

You know what people lie about when they buy a house?

The maintenance costs.

Most people don’t dream about monthly mortgage payments. They dream about $10k roof repairs that occur the month their HVAC system goes out. No one wants to deal with shelling out major cash for dead appliances and crumbling foundations.

Maintenance costs are why professional services are important. Improperly installed roofs don’t last as long and need to be replaced decades sooner than an expertly replaced roof.

Home maintenance costs really add up too…

Financial planners advise homeowners to save 1-3% of their home value every year for maintenance. So if you own a $300,000 home, you should save $3,000-$9,000 every year.

Ouch.

…but wait!

The average homeowner spends between $4,000-$22,000 on yearly maintenance & repairs. So why do people stress about maintenance costs?

Regular vs. Emergency Maintenance Costs

The truth is most people focus on one fund but neglect the other. Prevention is hardly the same thing as reacting to broken plumbing.

22% of homeowners spent less than $1,000 on home maintenance last year. On the flip side? 47% of homeowners spent OVER $5,000 on emergency repairs.

Got a problem yet?

Fund #1: Your Regular Maintenance Fund

Ok so how can you budget for all these crappy expenses?

Two words: Divide and conquer.

You need two separate budgets.

Budget for regular maintenance
Budget for Emergency repairs

Let’s break this down…

Budget #1: Regular Maintenance

Every system in your home needs upkeep. Air conditioners, hot water heaters, roofs, you name it. No matter how new your home is, things will need cleaned, inspected, and repaired.

Set aside 1% of your home’s value every year for maintenance. Here’s the formula:

Home Value x .01 = Annual Maintenance Budget

$250,000 Home X .01 = $2,500 PER YEAR for Maintenance

Boom. That easy.

Budget #2: Emergency Repair Fund

33% of homeowners don’t have enough to cover an emergency repair over $1,000. But consider:

Major roof repairs can cost up to $12,900
Foundation repairs reach $7,921
AAAAAND
Septic tank replacements = $9,500

Yikes.

Your emergency fund should be at least $10,000. I recommend starting small if you have zero saved. Get $1,000 set aside then build from there. Trust me, if your water heater explodes at 2AM, you’ll be happy you have $500.

Plan Ahead For Large Home Components

Here’s a little trick you might not know…

Home systems don’t last forever. Every furnace, roof, window has an expected lifespan. When you know these numbers, you’ll never be blindsided by needed repairs.

Roof: 15 Years (+/- 5 Years)
HVAC (Heating/Cooling): 15 Years
Water Heater: 10 Years
Windows: 20 Years
Major Appliances (washer/dryer/dish): 15 Years

Hell – I wrote a whole post on planning for large home expenses. Check it out: How To Budget For Large Home Expenses

But how can you plan if you don’t know the ages of your home systems?

Easy. Get a home inspector to come take a peek. Most offer maintenance inspection services for around $400-$500. Tell them you want to know what major systems need replacing and when.

They can’t see the future, but they can make educated guesses.

Bonus: Preventative Maintenance Is Cheaper

Buy it now or pay me three times as much later. That seems to be the motto with home maintenance.

Replace your HVAC air filters and you could save $600 on repairs down the road.

Tune up your furnace for $69 and you could avoid costly damage in the future.

Don’t rock that twig roast for 10 years. You’ll be sorry.

Options When You Don’t Have Enough

It happens to the best of us.

That rattly sound your AC has been making won’t go away. You go on Google and discover your evaporator coil is toast. New AC unit will cost $4,000…and it’s only July.

U.S. citizens spend $415 annually on repairs they couldn’t budget for. What do you do when repairs sneak up on you?

Option 1: Home Equity Line of Credit (HELOC)

Got one of these? sweet.

They’re like credit cards you can use for home expenses. Low interest rate and flexible spending. Tax deductible in some cases too.

Don’t have one? Get one NOW. You won’t need it until you need it. And if your emergency happens tomorrow, it’ll take FOREVER to get that HELOC approved.

Option 2: Financing Through Contractors

Contractors these days offer financing through third party banks. It’s a pretty slick system.

They apply for you. You get approved in minutes. Plus, rates can be competitive.

The downside? Don’t jump on the first option they give you. Call around for 1 day. You could end up paying thousands more on “contractor financing”.

Option 3: Personal Loan

No home equity? You can get personal loans to cover repairs. Just know these will be more expensive than your home equity loan.

Expect higher interest rates and set monthly payments. It is generally faster than the home equity options though.

Option 4: Credit Card

Home repairs on a credit card? Really?

Yea, really.

But ONLY as a last ditch effort. And if you MUST use your credit card, try these tips:

Try for a 0% APR card if possible.
PAY IT OFF. AS SOON AS POSSIBLE.
Never EVER finance a repair on your credit card long term.

Making It Automatic

You know what’s really helped me with home maintenance and repairs?

Automation.

Set up two savings accounts.

“Home Maintenance” – For regular household maintenance
“Home Emergency” – For surprise repairs

Program automatic transfers to these two accounts right after payday. Start with $50 to each account. If that’s too much, start with $25.

When you get a raise? Increase your “automatic savings rate”. Never touch this money.

Pro Tip: Use online banks. They pay more interest on your savings accounts. Every little bit helps when it comes to emergency funds.

Conclusion

Home repairs are going to happen.

The trick is not letting them devastate your bank account.

Save between 1-3% of your home value every year on maintenance. Have both a regular household maintenance fund and a separate emergency fund.

Know when your large home components will need replacing. Plan for those costs gradually over time.

…and most importantly, DO NOT wait until your water heater leaks all over your brand new carpet to think about a repair fund.