How to Budget for Home Repairs

Author: Brian Jones, Real Estate Loan Officer 03/03/2023

If you reside in a house, you are likely aware of the consistent need for maintenance. Just like with your automobile, proper care and attention can prevent small issues from developing into large ones. With the possibility of incurring significant and unexpected costs, consider the following factors when budgeting for home repairs.

Costs May Depend on Age, Condition, and Climate

Many factors can influence the cost of home repairs. As a house ages, materials like water pipes or electrical wiring deteriorate. In addition, an older house is more likely to be out of compliance with current building codes.

If your condition is already in decline, costs will generally be higher so it is important to address problems as soon as you take ownership. Regarding climate, you should consider what weather nuances are present. Here in Texas, our harsh summers can affect the lifespan of your roof or your air conditioning unit.

How Much Money Should You Set Aside

Once you consider the potential costs of home repairs, you are ready to determine how much money to save in advance of something failing. It is extremely important to be proactive instead of reactive. By saving in advance, you can set an affordable amount on a reasonable cadence, as opposed to incurring a larger and immediate cost after the repair is required.

A do-it-yourself homeowner can save on labor costs, but major home repairs can be overwhelming for even the savviest of handymen. You also run the risk of increasing the damage and having to pay a professional to do it anyway. If you hire a professional, consider the current cost of materials and supply chain issues that affect the timing and completion of the repair. Major repairs also may require adherence to current building codes, which are regulated by your city or municipality. If an inspector is required to sign off on the repair, then you most likely need a licensed professional to do the work.

Consider a Home Equity Line of Credit

Another option to budget for home repairs is a home equity line of credit. This is better suited as a secondary method only if your repair cost exceeds your savings. A line of credit is a viable alternative that may be cheaper for you than using your credit card or taking out a personal loan. It is critical to ensure you can afford the payments or otherwise, risk foreclosure.

Pros and Cons of a Home Warranty

Consider purchasing a home warranty, which is easy to locate by searching online or asking family or friends for recommendations. Most home warranties come with a contract and a service fee to have a professional make the repair. This amount is generally less than replacing the item yourself, like a water heater. On the other hand, you typically do not choose the repair company or the product brand. Also, home warranties do not cover everything and if abuse or neglect on your behalf caused the repair to become necessary, the warranty may be voided.

As with most plans for establishing financial security, the key to budgeting for home repairs is advance preparation and commitment to saving. Regardless of your savings amount, you will be in a better position to handle home repairs than if you do nothing. For more information on how to budget for home repairs, please visit the Loans and Lines of Credit section of our website.

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