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You must make sure you’re adequately protected.
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Owning a home can be a mixed bag, financially speaking. On the one hand, if you sign a fixed-rate mortgage, you get the security of predictable monthly payments, whereas if you rent, your costs could go up from year to year.
On the other hand, when you own a home, there are many expenses you’re forced to manage that are far from predictable. Your property taxes could rise over time. Your maintenance costs could creep upward as your home ages. And you never know when a repair issue might spring up out of the blue.
The latter can be really problematic if you don’t have money set aside in an emergency fund, or if you don’t have enough savings earmarked for home repairs. So how much money should you sock away in case something goes wrong with your home? New data reveals that $1,953 should be your minimum starting point.
Make sure you’re prepared for things to go wrong
Angi’s most recent State of Home Spending report reveals that in 2022, the average homeowner spent $1,953 on emergency expenses. So if you’re starting with little money in your savings account and are aiming to protect yourself, that’s the minimum amount you should aim for.
That said, if something major breaks in your home, like your furnace, water heater, or roof, it might cost a lot more than $1,953 to get it replaced. So the more money you’re able to pump into your emergency savings, the better.
Now is an especially important time to make sure you have cash on hand to cover home repairs. Borrowing costs are up across the board as a result of recent interest rate hikes on the part of the Federal Reserve. If you don’t have enough money in savings to pay for a home repair and you’re forced to take out a loan, you could get stuck with a really hefty borrowing rate.
What’s more, many people are spending more money than usual these days due to inflation and are already racking up higher credit card balances because of that. So the last thing you’ll want is to add to an existing pile of credit card debt by having to charge a home repair.
Don’t leave yourself vulnerable
When you buy a home, you don’t just commit to a mortgage payment. You commit to a host of expenses that can vary widely from one year to the next.
If you’re in the process of searching for your first home to buy, your best bet is to make sure you have a nice, robust emergency fund to tap after you’ve made your down payment. It can be difficult to anticipate the cost of home repairs if you’re a first-time owner, so coming in with a lot of savings can give you some protection.
And if you’re not sure you can manage the cost of paying a mortgage plus having to maintain and fix a home as needed, hold off on buying. The upside of renting is that any home repair issues that arise are your landlord’s problem, financially and logistically. And while you may not want to continue renting forever, it’s not a bad idea to rent until you’re in a place where you have plenty of money to put down on a home and enough left over to cover a host of costly repairs.
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