Home ownership has historically been coined “the American Dream.” With current mortgage rates tumbling to their lowest on record (the average rate for a 30-year mortgage being 3.29%[1]), we may see an increase in the number of mortgages written; but, we do need to preserve and maintain that dream with funds to cover home repairs and maintenance.

As a financial counselor and educator, the one question I frequently get asked from homeowners is: “How much should I save for home maintenance?” This is a great question to ask!  My answer is, “homeowners need to preserve and maintain their investment with a home maintenance account.  Start saving as soon as you have the keys to your home.  The amount to save differs for each household.  It will be based on what you can afford following one of these two rules – the one percent rule or the ten percent rule”.

Save Today for a Better Tomorrow

About 3 in 10 (31%) homeowners say they don’t have money set aside for home repairs and improvements — a matter of concern, considering 44% of those who have purchased a home experienced their first unexpected repair within the first year after closing.[2]

Most homeowners know they should save for their home’s unexpected expenses or scheduled maintenance.  However, they are unsure of the how much aspect.  I advise folks to follow these guidelines and their choice will be decided on what fits their budget.

  • The one percent rule (or purchase price). According to the one percent rule, you should set aside at least one percent of your home’s value every year for home maintenance. For a $360,000 house, this works out to $3,600 per year, or $300 per month. (Note: 1%-4% will suffice)


  • The ten percent rule (of monthly PITI). Here you would save 10% of the cost of property taxes, insurance and mortgage payments. For a $1,400 PITI payment, this works out to $140 per month, or $1,680 per year.

While the two calculations yield dramatically different results finance-wise, they each provide a security blanket in a time of need.  A suitable place to start when planning for the unexpected is to review Home Advisor’s True Cost Guide[3] (real costs from real home projects, updated daily, with local and national cost data).

Save Locally and Save it Separately

Once a decision has been made regarding what amount can be set aside in a home maintenance account, it is important to follow these guidelines:

  • Local and Liquid. Your home maintenance account should be kept in a local bank, easily accessible by you, to make a payment should an emergency repair arise.  While high-interest online banks seem appealing, the idea is an emergency payment cannot wait for transfers since the average transfer time from an online bank account is three days.
  • Separate. Secondly, I recommend keeping home maintenance funds separate from your core bank account.  This aids in keeping tally of what was spent and what remains.  Monthly automatic transfers from your main bank account to your home maintenance account will eliminate the need for self-reminders.

You will notice the ease and lack of frustration when making payment instantly for that emergency hot water heater repair, in the middle of the night, that flooded your basement! And it does happen!

When it’s Broke, Fix it

Lastly, while it may be tempting to put off repairs and maintenance, this behavior often backfires.  Certain repairs cannot be ignored, such as a leaking roof or mold infiltration.  These types of damages will only worsen with time, causing the price of the repairs to increase.

About the Author

Lisa Philios, AFC

Lisa Philios is an Accredited Financial Counselor® and certified Military Family Housing Specialist.  She is an alumnus from Berkley College, Magna Cum Laude, and Member of Phi Theta Kappa International Academic Honor Society.  She has worked with Military Saves and Operation Homefront.  As a financial educator she is experienced in teaching both the FDICs Money Smart Adult Education Curriculum and Merrill Lynch’s Investing Pays-Off Program.  She is also a proud Marine Corps wife and mother of two amazing boys.  Her work has been featured with Military.com, Blue Star Families, The Association for Financial Counseling, Planning and Education, America Saves, Military Saves, USMC Battalion newsletters, FINRAs Save and Invest, Military Avenue.

[1] https://www.bloomberg.com/news/articles/2020-03-05/u-s-mortgage-rates-sink-to-a-record-low-on-coronavirus-fears

[2] https://www.nerdwallet.com/blog/2018-home-improvement/

[3] https://www.homeadvisor.com/cost/

Leave a Reply

Your email address will not be published. Required fields are marked *