How to Budget for Costly Home Repairs

Owning a home is expensive enough without including costly home repairs. You want to be prepared for any emergencies that may arise, but you also don’t want to put a big strain on your budget. Here’s how you can budget for home repairs without breaking the bank.

Contribute to a Home Repair Fund

When setting aside money for home repairs, financial experts typically recommend that you save 1% of your property’s purchase price each year. This gives you a cushion for any repairs that may come up throughout the year. However, if your house is a bit older and will likely need more repairs, it’s recommended that you save closer to 3%. For example, if you have a newer house that costs $500,000, you should save $5,000 per year for home repairs. If you have an older home worth $200,000, you should set aside $6,000 each year for your home repair fund.

This may be difficult at first, especially if you’re not used to saving money for repairs. But getting in the habit of contributing to separate emergency funds can improve how you handle money and will make you more budget savvy, even if you’re a beginner.

Do the Repairs Yourself When Possible

Many home repairs and home maintenance tasks aren’t as complicated as we might think. If you’re good at DIY home maintenance, simple home repairs such as refinishing hardwood floors, replacing a toilet or fixing a garbage disposal may be something you can do on your own.

Before requesting service for someone to professionally fix the problem, see if it’s something you can do yourself. But if it’s a more difficult repair and you’re not confident in your abilities, it’s likely better to opt for someone to help you rather than do it yourself.

Prioritize Repairs

Some home repairs are more pressing than others, so you need to prioritize your repairs by which ones are most important. For example, you might’ve been saving up for a new roof. But if you decide to spend your savings on a new conditioner, you’ll be in a tight spot when it’s time for you to get that new roof.

Your home can fall to unexpected damages, so it can be difficult to plan or prioritize repairs. But try to be aware of home repairs and, if possible, prioritize which ones are most important. Try to tackle those first before you fund smaller, less important repairs.

Purchase a Home Warranty

The majority of repairs you’ll need to do in your house are for the systems and appliances in your home that malfunction or quit working. One way to budget for these costly home repairs is by purchasing a home warranty.

Affordable home warranty companies only charge around $400–500 each year for coverage. For example, Landmark Home Warranty charges $425 per year, which ends up being a little more than $35 per month. This covers most of your major systems and appliances, such as the air conditioner and heater, refrigerator, water heater, electrical system, pipe leaks, etc.

If you can’t afford to set aside a large amount for home repairs, consider purchasing a home warranty to cover the cost. If the system or appliance is covered in your home warranty package, the repair or replacement is free. All you’ll have to pay is the service fee for the maintenance work, which is typically around $60.

Find Other Ways to Save Money

If you narrow your budget and find other ways to save money, you’ll have more funds you can put towards home repairs and even home improvements that you don’t necessarily need. For example, you might’ve been wanting to redo your master bathroom for a while. If you don’t have any major home repairs you need done, making redoing your bathroom a priority. Put aside more money to fund that project.

Home repairs aren’t just the unexciting things like fixing a broken sink or water heater. They can be the fun projects you’ve been wanting to do since you moved into your home. However, be cautious with funding these projects, and make sure you still have an emergency fund for unexpected home repairs you need.

For those unexpected home repairs, or any home projects, make sure you have the funds you need. Here are some simple tips that can help you save more money each month:

Cancel cable and other streaming services you don’t use
Get rid of your gym membership and work out at home instead
Sell unused items, such as clothes, furniture, old cell phones, etc.
Cut down on costly habits, such as eating out, buying coffee, smoking, etc.
Consider installing a programmable thermostat, smart lighting, or other home automation equipment to reduce your energy bills

Avoid Taking out a Loan or Opening a New Credit Card

Unless absolutely necessary, you want to steer clear of taking out a loan or opening a new credit card to fund home repairs. This will just create more expenses for you with additional interest you’ll have to pay off in the future. Especially if you can’t pay off the balance anytime soon, interest rates and late fees can get you into even more money trouble.

There are a lot of factors to consider before borrowing money, so if you have another option rather than taking out a loan or opening a new credit card, utilize your other options first.

Check Your Credit Regularly and Stay on Top of Your Other Finances

It’s going to be hard to budget for home repairs if you don’t have your other finances under control. Keep a budget for your other finances and don’t forget your additional financial goals along the way.

Finally, regularly check your credit score and work to improve it. If you do have to borrow money for home repairs or other unexpected expenses, you’ll be prepared with a good credit score that will elicit competitive rates. Make sure you’ll be a trusted borrower and remember the five C’s of credit: capital, collateral, capacity, character and conditions.

McCall is currently a Content Marketing Strategist for BestCompany.com. She regularly writes about Finance, Technology, and home-related topics. Her work has been featured on Yahoo Finance, Forbes, MarketWatch and a variety of other well-known sites. She earned her degree in English and Technical Writing from Weber State University.