Graham Stephan Says You Need an Emergency Fund for Your Home. Here’s Why

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Without one, you might seriously land in hot water. 

There’s a reason some people prefer to rent a home than own one, even if they can afford a down payment and an ongoing mortgage payment. They don’t want the financial and logistical responsibility of owning property. Rather, they’d prefer to write a single rent check each month and call it a day.

Owning a home offers many benefits. You get certain tax breaks and the chance to build equity in a place of your own. Plus, when you buy a home, you get to make the rules, and you don’t have to listen to a landlord. That means you can finally get the 90-pound dog you’ve been looking to adopt.

But when you own a home, there’s the potential for a lot to go wrong through the years. And it’s important to be prepared for that financially. If you don’t prepare, you might end up in serious debt. And you might even regret your decision to buy in the first place.

Don’t buy a home unless you have a solid emergency fund first

When you buy a home, you need funds for a down payment, money to cover your closing costs (unless you’re rolling them into your mortgage), and cash to pay your movers. But on top of that, it’s important to have money in savings to pay for home-related emergencies.

Financial and real estate expert Graham Stephan agrees. In one of his newsletters, Stephan wrote, “Just like you should have an emergency fund for yourself and your family, you should have one for your home too.”

Even if you buy a home that seems to be in great shape, you never know what issues might be lurking. And also, if you’re buying a home, you may have plans to stay there long term. But over time, different appliances and systems can succumb to wear and tear. Your roof might need to be replaced. Your heating system might give out on you (most likely in the middle of winter so you need to scramble to get a new one).

Even small repairs, like broken faucets and loose fence panels, might put a strain on your budget. So it’s important to have money in savings you can pull from to address issues with your home. If you don’t, you might easily land in debt.

You don’t want to bemoan your decision to buy

Many people end up regretting buying homes because they underestimate the total costs involved. So when you’re in the process of looking for a home, realize that your mortgage payment is only one of several expenses you’ll have to grapple with. And build in room in your budget for things like maintenance and repairs.

At the same time, make sure to have a decent chunk of cash in savings in case major repairs pop up that your regular paycheck has no chance of covering whatsoever. A good rule of thumb is to save enough cash to cover at least three full months of living expenses. The idea there is to get yourself through a period of unemployment, but cash reserves that robust should also be able to cover a larger issue with your home that arises.

Having a solid emergency fund could give you more peace of mind as a homeowner. And as Stephan himself says, it pays to “plan ahead and save enough so that it doesn’t become a financial burden.”

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