Homeownership is part of the American dream. Unfortunately, the American dream doesn't come with an instruction manual. If it did, buying a house would be a very lengthy chapter. In fact, purchasing a home is just the beginning.
You might think you're done spending thousands of dollars after you take care of your down payment and closing costs. Sadly, you're likely mistaken. In fact, you should be prepared to start saving money for the following costs of owning a home as soon as you get the keys.
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1. Your Insurance Deductible
No one ever wants to file an insurance claim. However, there may be a day when you need to do just that. Instead of putting down payments toward your deductible on a credit card, you should have the amount of your deductible saved in advance.
Insurance deductibles can range from as little as nothing to over five percent of your coverage.
Look at your policy to determine how much you should save. Or if you're still looking for insurance, make sure you find the best deals. Companies like Lemonade offer great deals on their policies.
It's important to note that homeowners insurance policies don't allow you to make claims for things that simply wear out due to regular use. They only pay out if an insured event — such as a theft, fire, or hurricane — damages part of your home or belongings. An air conditioner that fails due to age or malfunction would not be covered. On the other hand, if lightning strikes your air conditioner, your insurance might cover you.
2. Appliances and Their Replacements
When you bought your house, the seller might have included appliances in the sale. If that's the case, you might not have to buy new ones immediately, but those tools won't last forever. Cheap appliances could easily break in just a few years, while quality items might last a bit longer.
At some point, you'll likely need to replace your refrigerator, stove, microwave, dishwasher, water heater, washer, and dryer. Individually, these items range from a few hundred to a couple thousand dollars each, depending on the model you choose. So don’t forget to budget for these replacements when calculating the costs of owning a home.
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3. A New Roof
Most roofs are expected to last for decades. We just bought a new home with a roof that, we were told, is good for 30 years. Fortunately, we know it’s more likely to last 20 years in the blistering Florida sun. That helps us be more realistic with when we'll need to start saving for a new roof. Roofs can run from a few thousand dollars to tens of thousands, depending on your home size, the roof’s complexity, and the materials you choose.
4. HVAC Systems
Heating, ventilation, and air conditioning systems always seem to fail when you need them most.
Chances are, your HVAC system will be on its last leg, and stress from the hottest days of summer or coldest nights of winter will finally make it give out.
HVAC systems usually last 10 to 20 years, depending on the model and your environment. They can cost over $10,000, depending on the size of your home.
5. An Annual Maintenance Fund
Major systems are likely to fail within a few years. The constant maintenance and repairs drive some homeowners crazy. You'll have to service the major home systems on a regular basis, and the costs can add up quickly.
The exterior of your home will likely need maintenance of some sort, whether you have to simply pressure wash it on a regular basis or paint it every few years. Meanwhile, the interior surfaces of your home will slowly deteriorate and need to be revitalized with a new coat of paint, fresh caulk, or other small repairs. Toilets will break, windows will leak, refrigerators will die, and so on.
As a general rule of thumb, you should expect to spend one percent of your home's value on maintenance costs during any given year.
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How to Save for the Costs of Owning a Home
Research how much longer it will be until you’ll likely need to pay for a major replacement. Then research approximately how much it will cost to replace the item. Divide the projected cost by the months or years until you have to make the replacement. This will tell you how much money you should periodically save until you need to make the replacement.
Even if your estimates end up being low, at least you'll have something to put toward the item. Many people have nothing at all. Worst case, you save too much and get to put some of the extra cash toward another family need.