Why You Need an Emergency Home Fund?
If you own a property, it’s not a question of if you’ll need to spend money on repairs or maintenance, but rather when.
Being a homeowner can be financially rewarding, but some costs associated with ownership might be more than you bargained for, hence the importance of setting up an emergency home fund.
Here’s a look at a few costs you can expect, as well as how to manage these expenses.
When some people make the decision to purchase a home, they often base this decision on whether they can afford the mortgage payment and utilities. The problem is that some buyers fail to leave wiggle room in their budget for ongoing home maintenance.
It doesn’t matter if you’re buying a new construction home or an older home, or whether the property is in excellent condition at the time of purchase, you can’t escape maintenance costs.
Regular home maintenance is important to keep the property in good condition, and it can also head off serious problems. Maintenance can include something as simple as re-painting the baseboards, or scheduling an HVAC tuneup or duct cleaning.
It also includes updating or replacing various items in your home: appliances, roof, doors and windows, flooring, etc.
Granted, these expenses don’t occur often. But it’s still important to plan ahead and build a fund, so you’re not caught off guard financially.
In addition to regular maintenance, you’ll also need funds for repairs that occur with little to no warning, yet need immediate attention.
Your refrigerator might give out, your roof might leak after a big storm, or your water heater might stop working. Keeping cash on hand makes it possible to handle these issues without relying on a high-interest credit card.
Tips to Easily Afford Maintenance and Repairs
Planning ahead for emergency repairs and maintenance is one way to deal with the cost of homeownership. Here’s what you can do:
Don’t spend all of your money on the home purchase. Today, many home loan programs require a down payment, and you’re also responsible for paying closing costs. However, you shouldn’t spend all of your money on a home purchase. Keep some cash in reserves.
Increase your savings. Make an effort to grow your emergency fund. This doesn’t mean that you can’t save for other goals, too. Let’s say you’re able to put $400 into savings per month. You might split this amount and put $200 into a home fund, and put the other $200 toward another goal. Increase how much you deposit into your emergency house fund as your income allows. Consider keeping this money in a high-yield savings account so you’ll earn a higher return on your money.
Purchase a home warranty. Look into purchasing a home warranty to reduce the out-of-pocket cost for some home repairs. You’ll pay a warranty company a yearly rate or a monthly rate. If you have problems with your electrical, plumbing, appliances or HVAC system, the warranty company sends a technician to repair the item for a flat service call fee — typically between $50 and $100. If the technician can’t repair an item, the warranty company pays the replacement cost. There are stipulations, so make sure you understand the terms of your agreement.
Get a home equity loan. Even after saving money, some repairs and maintenance might be more than you want to spend at one time. Rather than ignore an issue, speak with one of our experienced loan experts to learn about our home equity solutions. A home equity loan is a lump sum of cash that can be used for many purposes, such as home improvements and home repairs. You can usually borrow up to 80% of your home’s equity. These loans can include a fixed-rate and a fixed monthly payment. Another option is a home equity line of credit. This is a revolving credit line that you can draw from on an as-needed basis.
Interested in a home equity option? Give Cherry Creek Mortgage a call to see how much you can borrow from your equity.