How to Plan for House Repairs as New Homeowners

I recently celebrated my two year anniversary of being a homeowner and it just so happened to coincide with getting my driveway redone. This seemingly simple home renovation project was a big deal because it costs thousands of dollars and I spent months saving for it. As you might have guessed, compared to when I was living at home with mom, saving is a lot harder these days. On top of monthly bills, as a homeowner, I’m responsible for the mortgage payments, taxes, sewage, home insurance and more. Yet, before I started saving for nice-to-have home improvement projects, I made sure that I had enough money set aside for unexpected home repairs. Fixing a leaky toilet and removing two large wasp nests from my backyard could have easily derailed my savings goals this summer but all went without a hitch because I planned for home maintenance costs ahead of time and saved accordingly. For those who want to stay ahead of the curve, here are three ways to plan for house repairs. 

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Anticipate Future Repair Costs

One of the first things I recommend to new homeowners is anticipating future repair costs. Generally, the older the home, the more you’ll spend on maintenance and upkeep. 

Although I spent a lot of money upfront to repair my home when I first bought it, I don’t regret it. By getting a new roof, water heater, plumbing system and replacing all of the windows, I haven’t had to worry about unexpected repairs because everything is relatively new. If all holds up, I’m good for the next 10-30 years!

However, if you’re unable to make certain repairs when you first move in, get estimates for how much the most common house repairs will cost. Recently I found out that I needed to replace my fuel tank which costs $3,200. 

As a rule of thumb, set aside 1% of your home’s purchase price each year for ongoing maintenance, but if your repair estimates amount to more than that, save whichever amount is larger. 

For example, if you bought a house for $200,000, budget $2,000 a year for maintenance.

The most common repair costs include:

  • New roof
  • Hot water heater
  • Exterior siding
  • Repair plumbing or install new pipes
  • Remove mold
  • Foundation repair
  • Cracked cement
  • Electrical issues
  • Heating/Air conditioning
  • Termite damage

Start a House Maintenance Fund

If you don’t already have a separate bank account for home repairs, now is a good time to get started. After you’ve determined how much you should save, start a house maintenance fund and save up for it.

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Having money set aside for unexpected house repairs will help you avoid dipping into your emergency fund which should be used for unforeseen expenses, not things that you know will happen at some point like home repairs. I always aim to have at least $1,000 saved up for unexpected home repairs in my home maintenance fund.

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Home Warranty

Another way to plan for home repairs is to purchase a home warranty.

A home warranty or home protection plan is a service agreement that covers the repair or replacement of major home components and appliances. This agreements typically last a year. Some important things to look for in home warranties company reviews include 24/7 service calls, optional coverage options and low chance of claim denial.

Although coverage depends on where you live and the type of property you have, home warranty typically covers kitchen appliances, central air, electricity, plumbing systems, washer and dryer, roof leaks, door bells, garbage disposals and more. Double check your policy to see what’s covered.

How does it work?

When something covered by your home warranty breaks down, call the home warranty company and they will send out one of their contracted service providers. If the repair or replacement is covered by the warranty, they complete the work. You’ll have to pay a small service fee of $75-$150 for every service call on top of the annual fee which ranges from $300 to $600 a year.

New homeowners who do not have the experience to maintain a home or enough savings can use a home warranty to avoid expensive repairs. You also don’t have to worry about finding a contractor you trust, this is all taken care of for you.

Line of Credit

Lastly, opening a line of credit with a bank or credit union can help you offset the cost of home projects. While this is not something I recommend, I can understand why a lot of people want to pursue this option.

What is a line of credit?

Unlike a loan where you start paying interest immediately on the amount you borrowed, regardless of when you use the funds, with a line of credit, you only pay interest when you draw money from the amount that the bank agreed to loan you.

For example: You have a $30,000 line of credit with the bank and draw down $10,000 to replace your roof. As you payback the loan, your available credit replenishes. You only pay interest on the $10,000 you borrowed not the total amount loaned to you. Once you pay back the $10,000 you can borrow up to $30,000 again.

Read Next

Why You Need Multiple Bank Accounts

How to Save For Big Purchases

I hope you found these tips for planning home repairs helpful.

As a homeowner, what are you struggling with right now?

Feeling overwhelmed by your personal finances and need to rein in your spending?

Back Budgeting Basics walks you through step-by-step how to set financial goals and create a budget that aligns with your values so you can achieve your goals sooner.

4 replies
  1. Eric Crown says:

    Great article. The Home Repair bank account is a great idea that I have not seen elsewhere. Without a doubt, home repairs can wreck a homeowner with unexpected expenses. Home warranty can work, I prefer save and pay as you go. It also pays to have your own homebuyer’s home inspection prior to purchasing a home.


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