Look at Maintenance Costs Before Leaping Into Homeownership

The thousands of dollars’ worth of upkeep and repair catch some buyers by surprise.

By + More

White or off-white? Hot water heaters come in one, maybe two, colors. Buying a new one is not exactly a fun part of homeownership. Then again, neither is a cold shower.

The housing market is snapping back, and so is homeowner urgency to move up on the property ladder. That can mean a new home for some. For others, maybe it's renovations, fresh paint, and new furniture that take older properties from "has potential" to primo address.

[See 50 Ways to Improve Your Finances in 2012.]

But the thousands of dollars' worth of home maintenance, repair, and replacement expenses can catch some over-anxious buyers by surprise. Too many have their nose buried in a West Elm catalog and not the dishwasher manual. Maintenance and repair costs, along with taxes and insurance, must be considered on top of loan payments when crunching the numbers on homeownership. Only then can would-be buyers gauge how much house they can comfortably afford.

"People know that if they ignore maintenance checks at the 30,000-mile mark on their car or don't go to their dentist, they could have more serious and more expensive issues to contend with, but we don't always give our homes the same preventative checks," says David Lupberger, a veteran contractor and principal at remodeling and contracting consultancy Remodel Force. "The mindset is, if it's not leaking or smoking, I have time."

What to expect. On average, homeowners will spend between 1 to 4 percent of a home's value annually on maintenance and repairs, which tend to increase as the house ages, according to several real estate websites and mortgage firm Freddie Mac. Skimping on these costs may lead to depreciation of the home's value. Of course, you don't have to paint the exterior, replace the roof, or upgrade the furnace every year. But you should be prepared for the unforeseen happening, such as losing air conditioning on the hottest day of the year. Lupberger says it may be naïve to try to put an estimated expense range on repairs, since the specific age and location of the house makes each property unique (different climates can have varying impact on the siding, for instance.)

[See 10 Rookie Home Buyer Mistakes to Avoid.]

That fact alone is what makes personalized maintenance checks on a regular schedule with a reputable contractor vital, says Lupberger, who has devised a program to help contractors be more proactive in marketing annual home evaluations for clients. Together, contractor and homeowner create a list of projects by priority.

Sometimes, maintenance is simply a matter of serious cleaning and very basic care, which can save homeowners a bigger bill for major repairs or replacements down the road, says Daniela Baker, a blogger for CreditDonkey and Quicken Loans.

Baker advises giving regular attention to changing heating and air conditioning filters; cleaning out clothes-dryer lint; investigating cracks in windows, walls, and doorjambs for early signs of potential foundation damage; tackling mildew in its early stages; cleaning refrigerator coils; and regularly shampooing or steaming carpets.

Lupberger says energy-efficient upgrades are typically upfront costs that can eventually pay for themselves. Some 50 percent of the current housing inventory was built before 1980, which means many homes are under-insulated and have windows that are energy drains.

"Tightening up the envelope," that is, making select efficiency changes—beefed up insulation, window replacement, or a newer furnace—can cut monthly energy bills by 30 to 50 percent, which means it takes just a few years to earn back that initial expense, according to Lupberger.

There are resources for help. The National Association of Home Builders and Bank of America Home Equity produced a Study of Life Expectancy of Home Components, found at www.nahb.org.

[See How Safe Is Your Safe Money?]

The average life expectancy for some components has increased during the past 35 years because of new products and the introduction of new technologies, while the average life of others has declined, the NAHB says.