Estimating Annual Home Maintenance Costs

If you’re thinking about trading up to a bigger home, or moving from renter to homeowner, you’ve probably done a lot of math. BankingMyWay has a lineup of calculators that can help.

But one key figure is devilishly hard to project, and is often overlooked: If you buy a home, how much will you shell out every year for maintenance and repairs? A careful look at these potential costs might discourage you from buying a more expensive property, or might make renting look more appealing than it would seem otherwise.

Obviously, there’s no way to forecast these costs for sure. But mortgage-data firm HSH Associates suggests homeowners assume they will come to about 1% of the property’s value — every year.

That’s $3,000 on a $300,000 home. To be on the safe side, you should probably use that as a minimum. So let’s say $4,000, and assume you’d also need a healthy cash reserve for any big expense that’s not covered by homeowner’s insurance, like a new furnace or roof.

A $4,000 annual maintenance and repair budget is $333 per month. If you bought a $300,000 home with 20% down and a 30-year fixed-rate loan at 4.75%, your $240,000 mortgage would cost $1,252 a month, according to the Mortgage Loan Calculator.

A $333 monthly maintenance and repair budget would equal nearly 27% of your principal and interest payment. That stings!

Let’s look at it another way. Assume your home is an investment that will grow in value over time. Historically, home values have gone up about 4% a year, on average. Because of inflation, your maintenance costs will also continue going up, so they will always equal 1% of the home’s value. As a result, your home really gains just 3% a year. That happens to be the long-term inflation rate. So in real, inflation-adjusted terms, your home would not grow in value at all.