With proper planning, you can pay for any problems around your home.
You may have an emergency fund to cover medical expenses if you get sick or laid off, but do you have a home repair emergency fund? Whether you own a new or old house, you can encounter expensive emergencies. Here’s a step-by-step guide to starting and growing your home repair emergency fund.
What Is a Home Repair Emergency Fund?
If you’re wondering how to pay for emergency home repairs, here is your answer. A home repair emergency fund is an account with money earmarked to cover unexpected home repairs. While you can predict long-term needs after buying your home, such as replacing a decades-old roof, other issues like a burst pipe are less predictable and can arise without notice.
Similar to when you saved for a down payment, your home repair emergency fund is for one purpose only. Don’t use it for renovations or upgrades to boost your home’s value. It is only for unexpected costs that fall outside regular home maintenance.
Why Is a Home Repair Emergency Fund Important?
Emergency home repairs can add up. Replacing a broken water heater or cleaning a flooded basement can cost thousands of dollars, and your home insurance won’t cover all the expenses.
How Much Money Should Be in Your Fund?
You should save at least $5,000 to $10,000 for your home repair emergency fund. Consider setting aside more if your home is older and prone to needing repairs.
What Should a Home Repair Emergency Fund Cover?
It can pay for a range of emergencies, such as:
- Pest damage caused by termites or rodents.
- Appliance repairs or replacements.
- Electrical wiring issues.
How to Build a Home Repair Emergency Fund
For any savings plan, you must determine how much you can contribute by reviewing your monthly budget. Reevaluate your plan regularly to determine if you should put away more or less for home repairs. Remember, your budget needs to account for increased expenses due to an adjustable-rate mortgage or emergency pet medical care. Some months, you may not have as much wiggle room to build your fund. Be flexible.
Other tips for getting the most out of your home repair emergency fund:
- Use our digital banking tools to automate your monthly savings.
- Revisit your home inspection to address any potentially lingering problems before they become big headaches.
- Get a second opinion on home repairs before starting them and remember that lower bids are not always better.
- Create a savings account just for your home repair emergency fund.
Of course, if your dream home sustains extensive damage, a home repair emergency fund may not cover all your costs. You might need to tap into your home’s equity and take out a loan for big projects like damage to your foundation. We have a variety of home equity lines of credit and loan options, and our MyConcierge service can help you pick the right direction. You can also consider a personal loan to cover your expenses. We can help you reevaluate your home insurance needs as well.