Here's What the Average American Spends to Maintain a Home

By Maurie Backman Markets Fool.com

Owning a home can be an expensive yet rewarding prospect. But when most people calculate their housing costs, they tend to focus on the obvious expenses like mortgage payments, property taxes, and homeowners' insurance. But there's another aspect of owning a home that could really zap your finances if you're not careful -- maintenance.

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According to Zillow, the median home value in the United States is $193,800. The typical homeowner, meanwhile, will spend between 1% and 4% of his or her property's value on annual upkeep. If we split that range down the middle to arrive at 2.5% and apply that percentage to the median home value of $193,800, we wind up with an average annual maintenance cost of $4,845. That's just over $400 per month in upkeep and repairs.

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And while that 1% to 4% range might cover things like lawn care, snow removal, gutter cleanings, and the like, it may not encompass major expenses like needing to replace a roof or repair a sinking foundation. Furthermore, it stands to reason that as homes age, they tend to require more upkeep -- and money. So while you might start off spending 1% of your home's value on annual maintenance, over time, that figure is likely to climb.

It's for this reason that homeowners need to be careful about the housing costs they take on. In a recent Bankrate.com study, 37% of homeowners admitted that owning property has had a major impact on their ability to save for the future. And while that lack of savings might hurt you when you're older, if you buy a home you can't afford to maintain, you could wind up with a more immediate problem on your hands -- failing to keep up with your home expenses, and losing your property as a result.

Don't get in over your head

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Homeowners are typically advised not to spend more than 30% of their income on housing, but when most financial experts figure that limit, they're only including a mortgage payment, property taxes, and insurance. While it's true that home maintenance costs are far less fixed than the aforementioned, if you want to play it safe, you'd be wise to limit your total housing costs to 30% of your take-home pay or less.

Of course, if you're first buying a home, you may not know how much annual maintenance will run you. But if you use the data above, you can do your best to anticipate the cost of upkeep.

Let's say you buy a $300,000 home that's on the older side. You might choose to be conservative and assume you'll spend 4% of your property's value, or $1,000 a month, on maintenance. Now let's assume your monthly mortgage payment is $1,120, your property taxes total $300 a month, and your homeowners' insurance costs $80 a month. Without your maintenance costs, you're looking at just $1,500 a month, but when you factor in those estimated maintenance costs, that figure jumps to $2,500 a month. Yikes. And if you're only bringing home $5,000 a month, $2,500 is probably too much to spend on housing -- even though that initial $1,500 would've put you right at that 30% threshold.

You need emergency savings

Another must-do before buying a home, regardless of its associated maintenance costs, is to build an emergency fund with enough cash to cover six months of living expenses. Again, most financial experts will tell you to aim for three to six months of expenses. But if you're a homeowner, you'd be wise to target the high end of that range -- because you never know what outrageous expense might come your way, and you can't afford to get caught off guard.

Now at this point, you may be wondering whether owning a home is even worth it given the huge financial burden upkeep often entails. But while homeowners are subject to maintenance costs that renters typically aren't required to pay (or at least not to the same extent), GoBankingRates found owning to be cheaper than renting overall in 42 out of 50 states. Throw in the numerous tax breaks homeowners are eligible for, and it certainly makes the case for owning property instead of renting and paying somebody else's mortgage.

That said, if you are going to buy a home, make sure you understand what you're getting into as far as maintenance costs are concerned. And under no circumstances should you buy a home without adequate emergency savings in place. Owning a home can be a smart move financially, but it's not without risk, and if you're not prepared, you could end up in hot water if your maintenance costs come in higher than expected.

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