How much will people need to spend on their home repair? It is a very important thing to know what property owners can afford when taking out a housing loan to purchase a house. Unfortunately, a lot of homeowners pay little attention to these things.
A lot of property owners to take a relaxed approach to budgeting for house repairs, figuring they can spend as little as possible when expenses such as replacing dishwasher pop-ups or borrowing significant expenses such as replacing septic fields or the roof. But it can lead to different problems, especially in today’s financial and credit markets, when people can no longer count on tapping on property equity loans to cover considerable maintenance or repair.
In today’s age, people want to make sure they can cover part of the cost of major repairs themselves to improve their chances of borrowing the balance to cover these projects. Other options, including borrowing against their credit cards, may still be readily available. Still, these options are going to be very expensive compared to what they used to be years ago, especially if people take longer than one year to pay these loans.
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Figure on one to four percent of the property value per year
So individuals want to go into a house purchase with the capability to handle the majority of repairs on their own or borrow as little as possible. How much should they count on? While it still depends in part on how well-built or how old the house is, the rule of thumb is that people should expect to spend about one percent of their home’s price on repair costs every year, although some individuals put this figure as high as four percent.
The 4% figure is usually going to be for people who are looking to keep their houses in pristine condition – replacing carpets before getting worn out, frequent repainting, or upgrading appliances before they give out. But even 1% of the home value every year is going to be equal to about eight weeks’ worth of interest and mortgage payments, depending on the interest rate (IR) – or about one-sixth of the annual housing debenture cost, not including insurance and taxes. So looking at this situation this way, it is still a high cost to consider.
Life expectancies and the usual repair costs
It is pretty hard to predict exactly when people will need to repair or replace household systems or major appliances. But according to NAHB or the National Association of Home Builders, the usual life expectancies for most home components tends to be a little conservative; listing the minimum life expectancy individuals should expect from given appliances or systems is pretty useful to estimate the relative life expectancy of particular house components.
Mortgage lending firms supported by the government, such as Freddie Mac, used to publish lists of expected replacement and repair costs for home appliances and elements. Still, today, they no longer do so. But some people have taken it upon themselves to make lists and update them regularly. Of course, property maintenance is not a regular expense – costs will differ every year.
In some years, people may spend very little on necessary repair, then find out later that they need a new septic field or roof. Although there are guidelines individuals need to follow when it comes to the life expectancy of household systems and appliances, they need to know exactly when things are going to give out, so they need to be mentally and financially prepared.
Set up home repair funds
Because of the reasons mentioned above, it is an excellent idea for individuals to set up home maintenance funds they can use if needed instead of trying to modify their regular budget when the repair happens. Setting aside 1% of the property’s value every year will at least soften the blow when big repairs are needed and should enable them to cover most ongoing expenses like exterior paintings and replacing occasional water heaters, dryers, or other appliances.
It is also an excellent idea to go into home purchases with reserves on hand, about 4% to 5% of the purchase price, in case unexpected major assessments or repairs crop up in the first couple of years. And suppose ongoing repairs can end up costing less than the owner’s accumulated reserve funds after ten years or so. In that case, they can always put it into other excellent investments or big home improvement projects that they have not been able to do.Check out sites such as refinansieringavkredittkort.com to find out more about this subject.
Issues with deferring discretionary maintenance
As mentioned above, maintenance costs depend on what kind of conditions the property owner is going to keep their house in. While some things, such as dead furnaces in the middle of winter, will need immediate attention, other items, such as replacing battered garage doors or painting exteriors, don’t have to be done right away but will need special attention immediately.
There are several issues with deferring discretionary maintenance. For one, the issues will just get worse. For another, these maintenance projects, in some instances, will end up costing property owners moreover in the long run, as neglected maintenance and repairs can cause other issues to worsen, like leaky roof that can lead to water damage to the property’s walls and ceilings, or unsealed driveways that develop significant cracks every winter.
Lastly, other needed maintenance will pop up while people are deferring repairs on original items. It means people’s to-do lists will just get bigger, less manageable, and more expensive. There is a good chance that homeowners have already heard about how property improvements can help enhance the value of the house by adding additional rooms, decks, or finished basements.
Neglected-house repairs and maintenance are just the opposite. By not spending a lot of money on a needed repair or maintenance projects, the home value will decrease, even though property owners are saving funds on these projects themselves. But they are losing value sooner or later.