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.
- The 1% rule of thumb is a guideline that states you should save 1% of your home’s purchase price for ongoing repair costs.
- 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.
What Is the Rule of Thumb a for Home Maintenance Budget?
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.
Fiaher 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.”
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.
How to Use the Home Maintenance Budgeting Rule of Thumb
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. 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.
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.
Grain of Salt
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:
- 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.
The coronavirus pandemic added another level of wear and tear. For example, according to the HomeAdvisor 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