What do you budget for housing repairs?
Wondering if anyone who lives near a pricy metro area could share how much you budget monthly or have set aside for major repairs, or just your approach to handling unforeseen events.
The replacement cost of the house doesn't change due to supply and demand but rather the actual cost of material and labor. As such I use the 1% per year rule based on replacement cost.
Some people do $1/sq foot, which often comes out the same but doesn't fluctuate with actual costs in the same way replacement value might.
That said, determining replacement value can be something of a challenge.
I also consider the rule to handle general upkeep, so everything from replacing batteries in smoke detectors and air filter replacements to replacing appliances, HVAC and the new roof. I do not include things such as pest control or yard care.
We have several categories for home repair. First, an insurance deductible category. The full deductible amount always sits there ready to be used if we have a claim. Next we have a general repair category. We fund that to the tune of about 10% of our mortgage monthly. This is for smaller repairs that come up from time to time. Then we have categories for major predictable repair expenses: furnace replacement, new roof, appliances. We also have a home improvement category, which we separate out from repairs. We actually break that up into multiple categories according to the projects we’re working on at the time (ie, new flooring doesn’t take from repairs if it’s an improvement). That way we are protecting repair funds (needs) from those that we are freer to spend according to desires or wants for improvement.
As someone mentioned above, it’s recommended to set aside about 1% of the value of your home for annual maintenance. You can budget as much as 5%, though, to be extra safe.
Putting this money into a high interest savings account is a good idea too. Using a HISA from either Motive Financial or EQ Bank will earn you at least 1.25% in interest. Implicity Financial starts at 1.1% and MAXA Financial offers 1%. There are lots of options here to help you grow your home emergency fund.
We bought a house that has not been upgraded since it was built, and with our tight budget we've struggled to keep things funded.
I think the distinction between future forseen upgrades/replacements/repairs vs surprise things is important.
We knew out hot water heater was going to go up eventually, so we set aside the funds to do it, and then ended up waiting until it was really bad to go ahead and do it - however, my BF is able to do all of those repairs himself. So there was no need to wait on a contractor to come in and give us estimates and schedule us.
How much you can do yourself vs needing to hire someone is something to consider when deciding the time frame for a project. If you know you're going to have to hire someone then it is best to figure out how to plan for that rather than waiting until it becomes an emergency because emergencies always cost more.
So working with the age of your appliances and other things to figure out what when you're going to plan to have them replaced/upgraded is important. Doing it on your time line will save you a lot of money rather than when they go up!