Home Maintenance: How to Budget

Spending doesn’t stop once a home is purchased. Whether you are moving into a new home or an older home, you need to be aware of the ongoing maintenance that any home requires, and how to budget for it.

First, home buyers should understand the 1% rule. This rule assumes that normal maintenance on a home is about 1% of the value of the home per year. For example, a $300,000 home would require $3,000 per year to maintain. This would be enough to replace the roof…and then, a few years later, to replace a failed hot water tank…and then a few years later when a new central air conditioning system or heat pump is required.

Then there is the 3% rule. Some experts say home buyers should plan on spending 3% of the value of the home in the first year of ownership. This is because new homeowners will most likely have to buy drapes, blinds, a washer and dryer, a stove, maybe even a new roof covering. Also, new homeowners often customize the environment to their taste, so they need to budget for repairs, replacements and maintenance.

One way to know the extent of the maintenance needed and the costs to repair and/or replace items is to have a home inspection conducted before you buy the home. Home inspectors are required to let buyers know if a component is significantly deficient or if it is near the end of its serviceable life, and a reputable home inspection company may offer up-to-date repair-cost guides to help clients with their planning.

If you've already bought a home, remember the 1% and 3% rules. If you haven't purchased a home, consider a home inspection before you finalize your purchase agreement so you'll know what you're facing in case you're unable to get the seller to spring for replacement or repair costs as part of the sales purchase agreement on the home.

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