Save money in home repair fund

Some folks think that once you buy a house, you can simply sit back and watch it appreciate in value. It doesn’t exactly work like that!

Oftentimes, the land a house sits on will appreciate in value while the structure itself depreciates due to lack of care and maintenance.

In fact, we here at NeighborWorks of Grays Harbor see this all the time. The longer that maintenance is deferred – that is, put off – the more it can cost to bring the home back up to snuff.

Regular Maintenance is a Must

Pat Beaty and I spend a lot of time in these blogs addressing ways you can DYI (Do It Yourself) general home maintenance issues. But what happens when, inevitably, something more serious needs attention? Think new roof, foundation issues, major plumbing or electrical repairs and upgrades. What do you do then?

Hiring out the work can be expensive but necessary. Have you thought about how you might pay for these expected/unexpected expenses when they arise?

Will you pull money from savings? For most people, including me, that has some limitations. Will you put it on a credit card? Expensive. Or, perhaps you’ll go out and get a home equity loan or home equity line of credit? That can come with its own set of problems when time is of the essence and perhaps your financial or credit situation is less than optimum.

So, what do you do?

Think Mortgage Reserves

Most homeowners have a monthly mortgage payment that pays down their home loan. In addition to that payment, the lender also collects a bit more money to pay for property taxes and homeowners insurance.

They hold onto that money until the annual insurance premium or tax bill comes due and then pay for it out of these collected reserves. Simply put, you have the money when you need it. We might suggest that you think in these terms when it comes to your home maintenance fund.

Plan Ahead

Many of us have done something like this for different situations. In the past, I’ve had a college savings plan, a new car savings plan and a house down-payment savings plan.

Heck, I even have a pet savings plan for those high vet bills we pet owners can eventually expect. Instead of paying a pet insurance premium each month (which has limited coverage anyway), I put $25 per pet in my “Pet Savings” account. Once it hits a predetermined total, I stop putting money in that account until I have to use it. Then I start adding to it again.

Making It Happen

The same goes for my Home Maintenance Fund. If you were to put as little as $50 each month into a home maintenance fund, in five years you would have saved $3,000.

It may not buy a new roof, but it can sure take the edge off the cost of a new water heater or cover your homeowners insurance deductible should a covered event happen.

You decide what you can afford to tuck away in a special savings account, but the important thing is to start now. It’s as easy as going to your local financial institution and opening a basic savings account. My online banking service even lets me name my accounts so they show up on my account list as “Pet Savings” and “Home Maintenance.”

What else can a home maintenance fund buy you? Time. Sometimes you just need a little time to get longer-term financing in place for the bigger projects. Having some cash reserves available to meet your immediate needs allows you time to get other options lined up and may reduce a little of the stress, both mentally and financially.

How Much Is Enough?

So how much is enough to have set aside? Even those super smart guys on the radio and TV say “That depends….” For a home maintenance fund, I might suggest a goal of saving at least the equivalent of three months of house payments. Take that number and divide it by 60 months. Like our earlier example, that would be $50 each month if your monthly house payment is $1,000.

If you know a larger repair project is looming, then use that expense as a goal to start with. Of course, it still has to fit your budget so don’t worry if you can’t make this monthly number right now. Start with less, but start nevertheless.

What’s the worst thing that could happen? In 10 years you’ll be sitting on a pile of cash you don’t know what to do with? I’m sure you’ll think of something!