How to budget for home maintenance and big replacements

Start with your inspection report

HUD's notice to FHA buyers explains that a home inspector will estimate the remaining useful life of the major systems, equipment, structure and finishes and identify items that need repair or replacement. That is the raw material for a maintenance budget. Pull out:

• the roof's approximate age and condition;
• the age of the furnace, heat pump or boiler and the air conditioner;
• the water heater's age;
• the condition of windows, decks, siding and the driveway; and
• any items flagged for near-term repair.

If the report does not give an age, the manufacture date is often on a label on the equipment.

Turn costs into a yearly amount

For each big item, estimate what a replacement would cost locally and how many years it has left. Divide the cost by the years. A roof that would cost $15,000 and has about 15 years left needs about $1,000 a year set aside. Do the same for heating and cooling and the water heater, then add up the results.

Treat these as planning figures, not predictions. Systems sometimes outlast estimates and sometimes fail early. Revisit the numbers each year.

Add routine upkeep

On top of replacements, budget for the steady, smaller costs of owning a home:

• Heating and cooling servicing. ENERGY STAR recommends a contractor check-up for the cooling system in spring and the heating system in fall, and checking or changing filters monthly.
• Gutters, caulking and exterior touch-ups.
• Smoke and carbon monoxide alarm batteries and replacements.
• Septic care, if you have a septic system. EPA says household systems should generally be inspected at least every three years and tanks typically pumped every three to five years.
• Small repairs, like faucets, door hardware and appliance parts.

Where to keep the money

A separate savings account makes it easier to leave the fund alone. Insured bank and credit union accounts keep the money safe and available. Some owners hold the first few months of their fund as part of their emergency savings and build the rest over time.

Insurance and warranties are not substitutes

Homeowners insurance pays for damage from covered events, not wear and tear, as the Texas Department of Insurance explains. A home warranty may help with some appliance and system breakdowns, but it has exclusions and caps and often excludes roofs. Your maintenance fund covers what those leave out.

Adjust as the house ages

Each time you replace something, update the budget. A new roof drops that line to a small amount for decades. A system that reaches the end of its expected life without failing still needs its money saved. Reviewing the plan once a year, perhaps alongside your escrow statement, keeps it realistic.

The bottom line

Build your maintenance budget from your own home: list major systems, estimate replacement costs and years left, divide, and add routine upkeep. Save the result automatically, and update it whenever something is replaced.