Homeowners: How to Budget for Annual Home Maintenance & Repairs
“No trip to Home Depot is complete without two more trips to Home Depot.”
As the prices of homes, labor and materials have increased over the last two years, the costs homeowners face to maintain, repair and upgrade their homes have gone up too.
If you’ve ever had to put a large repair or a new appliance on a credit card (where rates are currently unreasonably high!), then you know this pain personally. Here’s how to be proactive so these regularly occurring “surprise” costs won’t put you in debt.
Photo courtesy of Hippo Insurance.
What do you mean by home maintenance, repair or upgrade?
Your house is a combination of several major systems designed to keep you sheltered from the rain and cold and allow you to complete all sorts of household activities like doing laundry, showering or cooking. These major systems need to be maintained so that they don’t break unnecessarily. For example, I just made an appointment to get our HVAC (furnace and A/C) serviced. Without the servicing, parts could break and cause bigger issues that need to be fixed, i.e. a repaired. Your HVAC system also has a useful life, so eventually it will need to be replaced entirely, or upgraded.
These also have different costs. For example, it will cost $144 for my HVAC company to come service and furnace and A/C and replace the filter in my furnace. If the furnace broke, it could cost between $200 and $3,000 depending on what went wrong. To fully replace your HVAC system, the cost could range from $5,000 to $11,000, or even up to $16,000 if you need the ductwork installed too. (Costs were estimated using websites Homeguide.com and Thumbtack.com.
Over 2019-2021, the US Census with their American Housing Survey measured a median $5,000/yr spending on improvements to their home.
How often do these costs come up?
Pretty regularly, actually. There are lots of guides that show you what household maintenance should be done to the interior and exterior of your home every season of the year. I adapted the checklist from Homeguide.com to provide you this: Tailored’s Home Maintenance Annual Checklist.
The maintenance is what keeps you from spending a lot of money on repairs. And the upgrading or replacing of major systems like your roof or plumbing is really determined by the age and location of the house and the age of the system. For example, some roofs can last 30+ years, but the same roof in Florida may last just 15 years because of the extra wear & tear from the sun, leading to hire roofing replacement costs. In Oregon, roofs must be constantly maintained due to the heavy rainwater and tendency to grow moss, so maintenance costs are more frequent.
Ah, the beauty of Oregon and the never-ending battle with moss.
How much should I set aside each year for home maintenance?
One popular answer to this question is for homeowners to set aside between 1% and 4% of the value of their home each year. People who live in newer homes may pay less, perhaps even as low as 0.2%- 0.5% of the home’s value.
However, many homes in Eugene were built in the 1960’s-1980s (like mine that was built in 1962!). In March 2024, the median listing home price in Eugene, OR was $510,000, which would mean spending between $5,100 and $20,400 EACH YEAR for home maintenance/repair/upgrade costs. Ouch.
Our house in South Eugene needs lots of care, including yardwork on our 1/3 acre lot and tree-trimming. We added an A/C a few years ago to stay cool during our ever-hotter summers, and also had to replace the original garage door last year.
Instead of looking at averages, it is better to consider the needs of your unique home. You can start by estimating when you will need to make major repairs and finding cost estimates. For example, if your roof needs to be replaced in 5 years, and it will cost about $10,000, then set aside $2,000 a year or $167 a month for the next five years.
If you don’t know what major upgrades need to be done on your house, consider spending $400-$500 on a home inspector to give you a report.
For regular maintenance, try to make a budget at the beginning of the year and set aside money each month. For example, here are some of the expenses we pay on an annual basis:
Sidewalk pressure-washing, $300
HVAC maintenance, $150
Lawn/yard care and roof sweeping, $1920
Tree Trimming, $600
Window washing, $250
Pest control (rodents because everyone in South Eugene has a chicken), $300
It all adds up to $3650/year or $304/month which is in addition to our mortgage, property taxes and home insurance.
How should I think about saving for home maintenance & repairs?
Create a separate savings account for your home expenses, sometimes called a “sinking fund”, and preferably keep the funds in a high-yield savings account.
Sinking funds are money you set aside each month for specific savings goals. They allow you to save for infrequent expenses and plan for large expenses over time. Having sinking funds can help prevent you from withdrawing money from your emergency fund or going into debt to pay for things.
Once you’ve determined your annual maintenance and major repair savings needs, put that money aside from your paycheck into this account. As you wait for expenses to come up, the funds in the HY Savings account will earn about 5.5% in annual interest (rates as of May 1, 2024), and you can access the money in a day or two when you need it.
Note that this savings should be separate from your “emergency fund”, which is meant to cover your ongoing living expenses for 3-6 months in the event of a job loss.
Full Disclosure: Nothing on this website should ever be considered to be advice, research or an invitation to buy or sell any securities. Please see the Disclaimer page for a full disclaimer.
Stacy Dervin, CFA, CFP® provides fee-only financial planning and investment management services in Eugene, Oregon. Tailored Financial Planning (TFP) serves clients as a fiduciary and never earns a commission of any kind. As a financial advisor, Stacy is on a mission to help Gen X and Gen Y be truly proactive about their financial futures.
