Unpacking the True Costs of Home Maintenance

By | July 20, 2016

If you are a senior citizen trying to decide between downsizing to a smaller home and moving to a retirement community, you’ll want to be aware of the maintenance and repair costs associated with home ownership.  When these additional expenses are figured into your overall budget, you may be surprised at how affordable senior living can be.

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The numbers don’t lie

An article in the Las Vegas Review-Journal indicates that you can expect to spend about 1% of your home’s total value each year on repairs and general maintenance.  If your home cost $400,000, that would be $4,000/year – or about $333/month.  You would also want to have some reserve cash on hand to handle large expenses not covered by homeowner’s insurance – like new shingles or an air conditioner.

Author Jeff Brown of MainStreet offers a bit more insight:

“If you bought a $300,000 home with 20% down and a 30-year fixed-rate loan at 4.75%, your $240,000 mortgage would cost $1,252 a month, according to the BankingMyWay.com.  A $333 monthly maintenance and repair budget would equal nearly 27% of your principal and interest payment.

Let’s look at it another way. Assume your home is an investment that will grow in value over time. Historically, home values have gone up about 4% a year, on average. Because of inflation, your maintenance costs will also continue going up, so they will always equal 1% of the home’s value. As a result, your home really gains just 3% a year. That happens to be the long-term inflation rate. So in real, inflation-adjusted terms, your home would not grow in value at all.

For still another way of looking at it, consider what economists call the “opportunity cost” of spending $333 a month on fix-ups. Suppose that instead of incurring these repair costs, you invested $333 a month in a mix of stock and bond mutual funds. You could have $57,282 after 10 years, $169,965 after 20 years and $391,630 after 30 years. That assumes a 7% annual return, about what most experts figure a mixed portfolio will average over long periods.”

Your money, your decision

If you own a home, maintenance and repair costs are inevitable.  For many, this goes with the territory of raising a family and building memories that last for a lifetime.  When the time comes for you to consider downsizing, though, be sure to weigh all your options when deciding between a smaller home or a senior living community.  To see how the cost associated with buying a new home compares with the cost of living at Primrose, drop us a line.  We can work through a simple cost-comparison tool with you that will help illustrate which option may be right one for you.  Just visit www.primroseretirement.com for more information.

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