How Much Money Should You Budget for Home Repairs? Insurance Experts Weigh In
If you live in a house long enough, it will need repairs. But it seems like an unwritten law of the universe that within three months of buying a new place—no matter how thoroughly inspected or newly renovated it is—it will require an upgrade of some sort. And we’re not talking the fun stuff, like choosing a new backsplash or finally splurging on that Samsung Frame TV that looks like art when you’re not binging Manifest. So, how much should you budget for home repairs, when it feels like you’re budgeting for the unknown? (After all, a basement leak could set you back anywhere from $600 to $10,000.) We turned to Andrea Collins, vice president of marketing at home insurance company Hippo, for her insights.
Spoiler: We were underbudgeting big time.
When you’re buying a house, Collins recommends setting aside 1 percent of the home’s value per year to cover the cost of unexpected repairs and maintenance. That’s $3,749, if your home costs $374,900 (the median price of a house right now)—significantly more than the $1,000 emergency fund many of us learned about in home economics. And it’s not just Hippo recommending it; the financial pros at Discover echo the 1 percent guideline, while experts at Bond Street Mortgage and State Farm suggest anywhere from 1 to 4 percent, if you can swing it.
That can be a wide range. Using the $374,900 average home cost as an example, that means setting aside anywhere from $3,749 to $14,996 per year. But you may choose to set aside more based on the age of your house (a 70-year-old home will likely need more repairs in the near future than a new build) and the results of your home inspection. The inspection—and information from the sellers—will give you a decent sense of what repairs are coming down the pipeline, if you’re buying a home.
State Farm recommends looking at the age of the roof, HVAC system and major appliances, so you can create a priority list of what’s most likely to need repairs within the next few years. Compare the age of the item with its average lifespan—and how worn it seems to be, according to your inspector—to get a rough idea of when it will need to be fixed or replaced. (Bankrate offers a pretty thorough guide to the longevity of most home features and materials, from trash compactors to vinyl siding.)
Beyond that, “items that are used most often at home usually round out our list of top repairs,” Shausta Merrill, vice president of customer contact center operations at home warranty company Cinch Home Services, told us via email. “Our top five claim items are refrigerators, clothes washers, air conditioning systems, water heaters and heating systems.”
As people spend more time at home during the pandemic, Merrill has only seen repair claims increase, making it all the more important to budget for the inevitable. Even if you’d rather spend that cash on a flatscreen.