Homeownership includes more expenses than paying the mortgage, taxes, and utilities. Unfortunately, your home’s many components won’t last forever. Unlike a renter, you can’t call the landlord to handle repairs, so you need to plan for breakdowns and the need for replacements.
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 rule of thumb may not be right for everyone. Other factors, such as the home’s age and condition, also dictate how much you should save for repairs. We’ll look at the 1% rule of thumb, the square-footage rule, and ways to fine-tune your calculations.
Key Takeaways
- 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.
Guidelines for Budgeting for Home Maintenance
When you're planning your budget for home repairs, the 1% rule of thumb is a step in the right direction. “Using 1% as a rule of thumb for home maintenance is actually a great example of when the common wisdom for something is pretty spot-on,” according to Mischa Fisher, chief economist at HomeAdvisor and Angi.
Fisher believes the numbers are pretty accurate. “Our latest ‘State of Home Spending’ report has average [annual] upkeep spending at $3,192, roughly 1% of the median home value in the U.S., which is a little over $300,000.”
Note
The 1% rule is not a perfect measure for everyone. Your home’s age, condition, and location may require more.
Max Anderson is the product director at Porch Group, a home-services software company. He admitted that the 1% rule is often cited as the minimum bar, but he added that there are caveats. “That figure is a lower boundary and applies most commonly to newer homes built with modern, durable materials, located in temperate and dry climates,” Anderson told The Balance.
Types of Budgeting Strategies
Many homeowners have no idea how much they need to budget for home repairs. This rule of thumb is just a guide. However, it’s not foolproof. There’s also another budgeting guide for upkeep expenses that you may find helpful.
The 1% Rule
If you’re using the 1% rule of thumb, you should budget at least 1% of the home’s purchase price for maintenance expenses. So, if you purchased a $250,000 home, you should budget a minimum of $2,500 for upkeep and repairs using this rule. But is that enough?
Elizabeth Dodson, co-founder of digital home management company HomeZada, doesn’t think so. Dodson explained that owners should set aside 1% to 4% of their home’s value, depending on the property's age. Older properties are likely to need more repairs.
Porch Group’s Anderson agreed that this fund should be higher than 1%, saying 1% to 3% is more prudent. “The annual maintenance costs for any particular home will vary, based on when the home was built, the materials and finishes used, and climate where the home is located,” he said. For example, if you have an older, wood home with wood finishes and live in a wet climate like the Pacific Northwest, Anderson believes your upkeep costs would be closer to 3% of the home’s value.
“By contrast, a newer home built with concrete and stucco finishes, located in a dry climate like Arizona, will likely come in on the lower end of the range near 1%,” he said.
The Square-Footage Rule
An alternative to the 1% rule is the square-footage rule, which dictates putting away $1 per square foot of your home for annual repairs. However, neither Anderson nor Dodson believes this is the best budgeting gauge.
“A fixed price per square foot glosses over some of the most important factors in home maintenance costs, like labor costs for home services,” Anderson said. For example, he explained that a homeowner who needs to replace the roof on a 2,000-square-foot home would pay two to three times more to do so in urban San Francisco than in rural Oklahoma.
Note
Home-maintenance and repair labor costs vary with the cost of living across the U.S., so your budget should reflect your area’s rates.
According to Porch’s data, average repair estimates are the highest in New Jersey; Washington, D.C.; Connecticut; and Maryland. These costs are the lowest in Mississippi, West Virginia, and Arkansas.
Another difference involves the type of home you have. If it has high-end finishes and appliances, Anderson said maintenance costs would be higher than for another house with lower-end finishes and appliances, even if the two homes were similar in size.
What To Consider with the 1% Rule
When considering either the 1% or the square-footage rule of thumb, it’s important to remember that these are just suggestions.
Anderson recommended the following repair frequency, based on Porch’s projections:
Roof replacement:
- Composition shingles: 12-20 years
- Asphalt shingles: 15-30 years
- Wood shingles: 20-25 years
- Rubber roofs: 30-50 years
- Metal roofs: 50-75 years
Home exterior repainting:
- Wood siding: three to seven years (depending on the climate), four years if stained
- Aluminum siding: five years
- Stucco: five to six years
- New siding materials (such as fiber cement): 10-15 years
- Brick: 15-20 years
Water heater replacement:
- Traditional tank water heater: eight-12 years
- Tankless water heater: 20-25 years
How To Fine-Tune Your Calculation
Once you set a baseline of how much you think you should budget for home maintenance, the next step is to customize your numbers. “Think through a couple of the big systems in your house, like your plumbing system, heating/cooling system, and waterproofing system (roof/siding/drainage), and anticipate, to the best of your ability, things that might go wrong,” Fisher advised.
Note
The coronavirus pandemic added another level of wear and tear. For example, according to the Angi report, 50% more people work from home, and 70% more are cooking at home. If people are spending more time at home, naturally, they’re going to wear out appliances and equipment sooner.
As a general rule of thumb, Anderson said you could decide whether you need to budget 1% or more with this guide:
The budget should skew toward 3% if the home is:
- Older than 30 years
- Located in a wet, humid, or stormy climate
- Built with lower-life materials like wood siding and composition shingle roofing
The budget should skew toward 2% if the home is:
- 10-20 years old
- Located in a moderate climate
- Built with moderately durable materials like stucco siding and rubber roofing
The budget should skew toward 1% if the home is:
- Less than 10 years old
- Located in a mild, dry, or temperate climate
- Built with modern, durable materials like fiber-cement siding and metal roofing
Frequently Asked Questions (FAQs)
How do you plan for home maintenance?
To plan for home maintenance, keep a close eye on the condition of your home. For example, clean out your gutters regularly and replace your HVAC system filters when dirty. Look for leaks around toilets and sinks and inspect the outside of your home, including the foundation, so see if any cracks or other issues are starting. If you're uncertain of what to do or what condition your home is in, it never hurts to consult a professional.
What is a home warranty?
A home warranty is a contract between a homeowner and a home warranty company. It helps to cover the cost of repairing or replacing major systems in the home, including HVAC and plumbing. It may also cover appliances like a dishwasher and refrigerator. A home warranty may be offered when you buy a home, and you can also buy one on your own.
