Insider's experts choose the best products and services to help make smart decisions with your money (here's how). In some cases, we receive a commission from our partners, however, our opinions are our own. Terms apply to offers listed on this page.
Part of the responsibilities of a homeowner are the costs that come with home maintenance. Home repairs are often expensive and come at inopportune times. However, with a little planning, you can reduce the stress you feel when you hear your roof leaking.We have some tips on how much to budget for home maintenance, where to keep your money, and what to do if you don't have enough money saved up when you need it. How much should you budget for home maintenance?Home repairs and renovations range in cost from $3,972 to $22,300, per data from service professional matching site HomeAdvisor. Some common home repairs include:RoofsDecks and porchesHeating/ACWindowsAppliancesElectrical systemPlumbingWater heaterFoundation Water damage Mold removalTermite damage Septic systemMany home repairs cost thousands of dollars, so it's important to set aside a substantial amount of money for them.
You'll also avoid hefty borrowing expenses if you've saved enough for home repairs when you need to make them. There are a couple of methods experts recommend when deciding on a budget. Set aside a percentage of your home's value."I recommend homeowners save about 1% to 4% of the total purchase value of their home after considering important factors like location, age, and condition of the house," says Loretta Kilday, a Debt Consolidation Care spokesperson, attorney, and financial expert. "This is because your home's average annual maintenance costs may exceed the 1% value. So budgeting a little more than average is helpful when accounting for major home repairs."Using this method, a $500,000 home would need a maintenance fund between $5,000 and $20,000. Square foot rule.
Budget $1 for each square foot of your home. If you have a 2,000 square foot home, for example, put $2,000 each year toward maintenance costs. Quick tip: Older homes typically have higher maintenance costs than newer homes, so you'll want to aim for the higher end of expert recommendations. Where should you keep your home maintenance fund?You can keep your home maintenance fund in many places. You may be able to earn interest on the amount while maintaining quick access to the money."You can keep your home maintenance fund in a standard savings account," Kilday says.
"But it is best to look into other options too, where you may get higher return rates so that your money earns interest while it sits there," she says.She recommends a couple of place to keep the fund:A high-yield savings account. A HYSA earns you higher interest rates on your savings than traditional savings accounts. You can often find them at online banks, and you can withdraw your money at any time. A money market account.
An MMA is a type of savings account that often has a tiered interest rate or quick access to your account via check writing or a debit card. "With an HYSA or a money market account, you can easily withdraw money when needed while receiving decent interest when it's in there," she says. Accounts that are not ideal for storing your home maintenance fund include: Certificates of deposit. CDs lock in your interest rate for a set period, ranging from several months to several years, and you'll usually face a penalty for withdrawing the money before the period expires. Individual retirement accounts. IRAs are vehicles for storing retirement funds.
You'll also pay fees for taking money out before you turn 59 ½. "I don't recommend CDs or IRAs because these are difficult to withdraw funds from, and you may have to pay the penalty for early withdrawal," Kilday says. Quick tip: Keep your home maintenance fund separate from other accounts, such as your emergency fund. What should you do if you need to make a home repair but don't have money saved up?If you don't have the money you need when a major repair bill hits, don't fret. You have options to finance the cost of the repair that won't sink you. Home equity loan or home equity line of creditIf you have equity in your home – you owe less than the home is worth – you may be able to access funds with a home equity loan or line of credit. A home equity loan or line of credit is money lent to you against the value of your home.
Your home is used to secure the loan, which nets you a better interest rate than other options, but it does put your home at risk of foreclosure if you're unable to make the monthly payments. The amount you can borrow depends on your income, credit history, and how much your home is worth. Many lenders won't let you borrow more than 80% of the equity in your home. You'll get a lower interest rate than a personal loan or credit card and can use the money flexibly. However, closing on a home equity loan or line of credit can take several weeks or more.
If you need to pay a repair bill immediately, you may not be able to get the loan in time. Personal loanA personal loan is an installment loan you can use for many reasons, including home maintenance costs. They are available from a large number of financial institutions and you can borrow any amount from a few hundred dollars to tens of thousands of dollars. Lenders look at your credit history, debt, and income to determine how much they can lend you.
Approval is generally quick and your home isn't at risk if you aren't able to make the monthly payments. Like a home equity loan, the better your credit score, the better the rate you'll likely receive. There's a faster approval process than with a home equity loan, and your home isn't at risk. On the flip side, you'll likely pay a higher interest rate.Credit cardMany homeowners plan on using credit cards to finance unexpected home repairs.
However, putting expenses on a credit card should be your last choice, due to the high interest rates credit cards typically charge. You may be able to qualify for a new card that doesn't charge interest on new purchases for a certain amount of time. A credit card with an introductory 0% APR is one of the better options if you have a little time before you need to pay for home repairs.
The money is immediately available and can be used flexibly. The rates you'll pay may be even higher than personal loans. Quick tip: Financing home repairs with a credit card can be very expensive. Before you swipe, consider a personal loan or a credit card with a 0% introductory offer.