The Annual Housing Costs that You Should Include
Do you miss renting? If you own your home, you probably miss renting on those mornings you wake up to a broken water heater. You perhaps wish you could text a property manager when your oven decides to go kaput. And no homeowner likes spending their hard-earned money on such boring things as a new roof or windows.
Home maintenance is one of the budget-busting items that seem to come out of nowhere. When new homeowners create budgets, they often don’t realize the cost associated with maintaining and fixing appliances. They don’t realize how much a plumber charges on Thanksgiving to unclog the pipes under a kitchen sink that are full of potato peels. They don’t understand the hassle and cost associated with replacing a bathroom ventilation fan.
How do you budget for housing costs? We all know it is a lot more expensive than multiplying the amount of your monthly mortgage payment by twelve. Before we talk about costs associated with maintaining a home, let’s learn about two popular methods of budgeting.
The One Percent Method
Some websites encourage homeowners to set aside one percent of the purchase price of the home for ongoing maintenance. For example, if your home costs $250,000, you should set aside $2,500 each year for maintenance. This would be about $208 per month.
Of course, this method has its issues. It does not take into account the age of the home when you purchased it or the cost of labor and materials in your area. It also doesn’t take into account the weather in your area, and how harsh conditions may increase the amount of money you need to spend to maintain a home.
The Square Foot Method
Other websites encourage homeowners to set aside $1 per square foot per year for maintenance costs on the home. For example, if your home measures at 2,500 square feet, you should budget $2,500 each year for maintenance.
While this method gives you a starting point on how to budget for household maintenance, it does not take into account the costs of materials in your area, as well as the weather.
Also, let’s say you purchase an older home. Perhaps the home was a great deal because the roof, water heater, and heating unit were original to the house. A $2,500 annual budget won’t put a dent in any of those major expenses.
We have shared two methods of how to budget for annual housing costs. What are some of the expenses that traditionally fall into this category? Here are some things you need to plan for if you are a homeowner.
Roof costs vary depending upon the style of roof, size of the house, and the materials used. They usually last between twenty or thirty years. This is an expensive project, even if you attempt to do it yourself.
Window costs vary greatly as well too. The price depends on the type of windows you purchase. You will also pay more if you need to replace the window frames or sills. Some homeowners choose to replace a window or two each year to spread out the costs over a longer time.
Hot Water Heater
Is the phrase “hot water heater” redundant? While you are thinking about that, you may also think about the last time you replaced this critical unit. Can’t remember? You better start budgeting for this then.
One way to tell when your hot water heater is at the end of its life is to look at the number of units that appear during the big trash pickup in your neighborhood. If all the homes on your street were built at the same time, chances are that the hot water heaters will all go out at the same time as well. Maybe you and your neighbors should check into buying water heaters in bulk to save money.
How come your ugliest, dirtiest appliance seems to last longer than others? Does it seem like you are always replacing your dryer while your stove keeps chugging right along? Repair costs on appliances are astronomical. Most of the time, appliance malfunctions come out of nowhere. And like celebrity deaths, they seem to come in groups of three.
It is hard to budget for everything that can go wrong on a house. One way to enjoy a more consistent expenditure is to purchase home protection plans. They take the guesswork on how much you will spend each month for those pesky, unplanned appliance repairs.