Homeownership includes more expenses than paying the mortgage, taxes, and utilities. Unfortunately, your home’s many fixtures and fittings won’t last forever. Unlike a renter, you can’t simply call the landlord to handle those repairs, so you need to plan ahead for breakdowns and the need for replacements in order to not get caught out with an unexpected hefty bill.
But how do you decide how much you should budget for home repairs? The 1% rule of thumb is a good place to start. This involves setting aside 1% of the home’s purchase price for repair and replacement costs. However, that may not suit everyone. Other factors, such as the home’s age and condition, also impact how much you should save for repairs. We’ll look at the 1% rule of thumb and the square-footage rule to begin, and point out lots of handy hints and reminders along the way too.
House maintenance costs can vary significantly, so it's essential to be aware of the different types of potential expenses that might arise throughout the year. These costs can generally be divided into three main categories:
- Routine upkeep: These are regular tasks like cutting the grass, cleaning the gutters, boiler and appliance servicing. While these costs are usually smaller and more predictable, they add up over time, making them a key part of your annual budget.
- Preventive maintenance: This includes proactive measures like roof inspections, chimney sweeping and sealing windows to avoid future problems.
- Emergency repairs: These expenses often arise suddenly and can range widely in cost. For instance, fixing a burst pipe might cost anywhere from £200 to £3,000, depending on the damage and location. If water damage occurs, the costs can skyrocket, potentially exceeding thousands for extensive repairs and mould remediation.
How should you budget?
If you’re a homeowner and haven’t faced a big repair bill yet just wait. Even in the best-maintained homes, things succumb to wear and tear and will wear out or break. Budgeting for these inevitable bills isn’t always easy. One commonly cited rule of thumb — to save 1% to 4% of your home’s value each year for maintenance and repairs.
The 1% - 4% rule
Aim to try and set aside 1% of your home's purchase price each year for maintenance. This method provides a straightforward way to estimate annual expenses. For example, if you purchased your home for £250,000, you should plan to allocate £2,500 annually for maintenance costs. But some feel this isn’t enough and suggest that homeowners should set aside 1% to 4% of their home’s value, depending on the property's age. Older properties in particular are likely to need more repairs. It’s always more prudent to budget to save more than you need, not less!
The square foot rule
This approach considers the size of your home when planning for costs with the general thinking being that bigger homes need more maintenance than smaller ones. Aim to budget £1 per square foot of your home annually for maintenance. For example, if your home is 2,500 square feet, you should set aside £2,500 each year for maintenance expenses. This method is very simple, which makes it easy to follow. On the other hand, it’s not as accurate. The square footage method doesn’t consider factors like your home’s age and location. Still, if you’re just looking for a ballpark number of what to put in your savings account each month to cover home maintenance costs, your home’s square footage can give you an approximate goal.
Flexible Monthly Savings
If setting a fixed amount for maintenance isn't feasible, save what you can each month. This method requires a higher level of commitment since there's no defined budget. The key is to save something every month, no matter how much. For example, if you manage to save £200 this month, aim for £400 next month if possible. The important thing is consistency—small, regular contributions will eventually build up to cover unexpected repairs.
Are there any other house repair costs to consider?
Unfortunately, there are plenty of other things that can go wrong around the house - or that just need a little TLC every now and again. You may not need it, but it’s always smart to have some money stashed away for house repair costs.
For example:
- Appliance repair and/or replacement
- Electrical repairs, such as fixing faulty light switches
- Plumbing repairs, such as fixing a leaking tap
- Interior decorating costs, such as plastering and painting
Factors that affect the cost of home maintenance
There are many factors that will make annual home maintenance cost more or less. The most significant factors that determine the cost of home maintenance include:
- Size: A larger home has bigger surfaces to maintain and requires more powerful home systems to function, which cost more to replace when they break or wear out over time.
- Location: Homes in wet, humid regions and areas with frequent extreme weather may need more frequent repairs than those in areas with mostly mild or moderate weather.
- Age: Older homes typically cost more to maintain as appliances, systems, and structural components are closer to the end of their lifespan.
- Lifestyle: In this post-pandemic age, people are spending more time in their homes for both work and recreation, increasing the wear and tear on appliances, surfaces, and home systems.
Key Points to Takeaway
- You can use the 1% rule of thumb, which states you should save 1% of your home’s purchase price for ongoing repair costs, as a guideline when budgeting for home maintenance.
- The square-footage rule is another option for estimating how much you should save for home repairs.
- The age and condition of your home are factors you should consider when determining your maintenance budget.
- It’s hard to predict exactly how much money you’ll need, because home components may fall short of their expected lifespan, or they may last much longer.
- Home maintenance costs are not the same as emergency repair costs.
It’s important to remember that home ownership also comes with responsibilities. Unlike in a rental property, where your landlord usually takes care of annual maintenance and repairs, all of these costs will now fall on you. House maintenance costs are never fun—but keeping up with necessary repairs and updates is crucial to maintaining your property value and avoiding surprise expenses down the line.
Things like home repairs and maintenance should be part of your household budget, right along with groceries, utilities and paying down debt. Whether you use the £1 rule or 1% rule, it’s important to make sure you set some money aside each month for your home maintenance or repair budget. It’s crucial to consider a number of elements when calculating your household maintenance budget. These variables include the age of the home, its location, its size, and its state. Compared to newer homes, older homes often need more care and repairs.
By taking all these into account, you can determine the typical cost of house upkeep and make sure that you set aside an appropriate amount of money for maintenance and repairs. If you get caught by a surprise emergency repair, you could consider a home improvement loan.