Buying an Older Home? Here’s One Crucial Thing You Need

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A 75- or 100-year-old house may come with charm and beauty — but potentially also expensive problems. Here’s how an emergency fund can save your finances. [[{“value”:”

I’m officially an aspiring home buyer. As I write this, it’s very early in the process for me, and I’ve only viewed a few homes. But as spring arrives in my part of the world, I expect the number of houses on the market to pick up and with any luck, I’ll be able to find one to make my own. I live in a city with a lot of older homes, and based on my budget, I’ll likely be buying one.

As beautiful as older houses are, they also come with a big potential pitfall — higher and more frequent repair costs. Let’s take a closer look at older homes and the best moves you can make to protect your finances in the process of buying and owning one.

Older houses can come with surprises — an emergency fund can help

Why is an emergency fund a lot more crucial when you buy an older home? Simply put, the materials and components used to build them decades ago are often far different from materials used in home construction today. This can be a good thing — imagine the beauty and staying power of hardwood floors made of real wood, rather than a composite, for example. But the converse of this is knob-and-tube electrical wiring or a decades-old furnace lurking in the basement.

Having money in a savings account can help you address problems as they arise — or even take care of them once you take possession of the home (regardless of how old it is). Imagine waking up on a cold winter morning to no hot water, and learning that your old water heater has given up the ghost and needs to be replaced.

Having to put that expense (which could run you an average of $1,300, according to Angi) on a credit card could add financial stress to an already stressful situation. If you could pay for it out of your emergency fund, that would certainly be a happier circumstance. It’s a good idea to save 1% of your home’s value annually for maintenance costs — but if your house is older, saving more would be a safer bet.

A real-life example of the expenses of old homes

I know some folks in my city who bought a 150-year-old home back in 2019. It was purchased and improved by house flippers prior to them buying it, and while some of the additions are nice (new windows save them a ton of money on their energy bills), the flippers neglected to fix some serious problems that have cost my friends a lot of money.

To date, they’ve incurred almost $10,000 in costs to fix a major plumbing problem and first repair and then replace their furnace. Personally, I’m excluding flipped homes from my search for just this reason — sure, new kitchen appliances are nice, but I’d rather feel confident that I’m not buying a house with loads of untreated issues.

My plan for buying an older home

Since I know I’ll be buying an older home, I’m approaching the process strategically. While putting 20% down on a home would save me from paying for private mortgage insurance (PMI) every month, it would also likely leave me flat broke.

So instead of draining my savings account when buying a home, I’m aiming to put down just 10% of the price. This will leave me enough money to cover closing costs and any other bits and bobs along the way to closing on my mortgage. Plus, it should also leave me with a starter emergency fund for any unplanned expenses that come up once the ink is dry on my mortgage paperwork.

A home inspection is a must

I’ll also be getting a thorough home inspection once I find a house to buy and get an offer accepted. In the buying frenzy (and low mortgage rates) of 2020 and 2021, some home buyers unwisely waived an inspection contingency to improve their chances of being able to buy, but I abjectly refuse to do this. It might take me a few tries to get an offer accepted on a house (due to stubbornly low inventory that’s resulted from higher mortgage rates), but I will not be buying a house full of unknown problems — and you shouldn’t either.

If a home inspection turns up issues with a house, it doesn’t mean you can’t still complete the deal with your mortgage lender. It might mean that you should try to negotiate the price you’re paying for the house, or request that the sellers pay to fix the problem, but if you love the house and want to proceed with the purchase, you can. At least you’ll know what you’re getting yourself into.

If you’re joining me on the quest to buy a home in 2024, good luck to you. You’ll never regret having a solid emergency fund under your belt when you become a homeowner.

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