Here's What Happens When You Don't Budget Enough for Home Repairs

When you buy a home, you don't just commit to a monthly mortgage payment. You also have to take on the peripheral costs of homeownership. Those include property taxes, homeowners insurance, upkeep, and repairs.

The latter, however, tends to catch homeowners off guard. Not only can home repairs be expensive on a case-by-case basis, but they can also be necessary more often than expected. So it's important to allocate plenty of money in your budget for home repairs. If you don't, you could end up with serious debt.

Make sure you're prepared

Budgeting for home repairs can be tricky, namely because without a crystal ball, it's impossible to predict when things will break or go wrong, and how much it will cost to fix them. But one thing you should know is that if you don't budget enough money for home repairs, you could end up loaded with credit card debt.

Many home repairs, by nature, are things you can't put off once they become obvious. If your roof is leaking, for example, you can't just sit back, save up some money, and address the issue a few months down the line. If you don't act quickly, your home could sustain serious water damage.

Similarly, let's say your air conditioning system blows the first week of July. If you don't replace it immediately, you could be in for a very miserable summer.

That's why it's important to allocate plenty of money in your budget for home repairs. And the amount you land on should hinge on the age of your home. If your property is older, you may want to pad your budget to account for the fact that things may be more likely to break.

Now many housing experts recommend allocating 1% to 4% of your home's value each year for upkeep. But it's a good idea to double that figure so you also have money set aside for repairs. And the older your home is, the more it pays to veer toward the top end of that range.

So, let's say you live in a 70-year-old home that's worth $300,000. Allocating 4% of its value for maintenance means setting aside $12,000 a year for that purpose. You may, to be safe, want to also allocate an additional $12,000 for repairs, which are separate from anticipated upkeep.

That means setting aside $2,000 a month in your budget for maintenance and repairs combined, which may not be doable for everyone. But if that's the case, do the best you can.

You don't want to take on extra debt

Racking up credit card debt can be both costly and stressful, so it pays to err on the side of allocating extra money in your budget for home repairs. And if there's a month or two when you have no repairs, the money you have allocated for them shouldn't be spent. Instead, you should stick that money into your savings account so you have funds available in case larger fixes become necessary.

In addition to making room in your budget for home repairs, you should aim to have money in savings for that purpose. Recent data from All Star Home found that nearly 25% of homeowners don't have the ability to cover a $1,000 home repair emergency. That's a situation you really do not want to land in if you can help it.