Home Finances Overview: How Homeowners Can Save Money

Owning your own home is the epitome of success. There’s nothing quite like walking into an inviting retreat that’s all yours after a long day at work.

But as many homeowners know, homeownership isn’t cheap. In addition to your monthly mortgage payment, maintenance and repair costs can sneak up unexpectedly, property taxes can increase, and remodeling projects can cost thousands of dollars.

The Basics of Home Finances

With the popularity of home improvement TV shows and websites, many handy homeowners have begun tackling DIY projects to increase their homes' value. Although you can complete some renovations yourself for a fraction of the cost, major updates like kitchen remodels need to be handled by a licensed professional. This means it's time to budget for an expensive remodel.

As a homeowner, it’s important to have an emergency fund with enough money to cover unexpected home expenses. If you do not have a solid emergency fund, you may have to take out loans or put expenses on credit cards to repair your systems and get your home back up and running. This can put you into debt fast. A good emergency fund should have 3-6 months' worth of living expenses.

With a home warranty, you won’t have to worry about spending money out of pocket if an appliance or system in your home breaks down. Home warranties provide protection by covering repairs and replacements for major household appliances and systems. Many home warranty providers offer different plans so you can choose the right amount of coverage. Items most commonly covered by a home warranty plan include:

Clothes washer and dryer
Electrical systems
HVAC system
Kitchen appliances
Plumbing systems

The Cost of Homeownership

From the down payment and closing costs to furnish your new home to the regular monthly expenses, homeowners have many costs to consider. Your mortgage payment is likely one of your largest monthly bills, but other expenses like property taxes, insurance, and maintenance can really add up.

On average, homeowners in the U.S. spend around 3-4% of their home's value each year on maintenance and repairs. This means if you buy a $200,000 home, you should expect to spend $6,000-$8,000 annually on upkeep and fixes. Some years you may spend less, but a major repair like a roof replacement or HVAC system replacement can cost $10,000 or more.

In addition to maintenance, remodeling projects are a large and important part of many homeowners' budgets. Remodels not only update worn parts of your home but also increase resale value for the future.

Real Estate and Mortgage Guides

Purchasing a home comes with a lot of knowledge about financing and budgeting. Below are some guides for home buyers related to real estate and mortgages:

Saving on Homeownership Costs

Luckily, there are several smart ways homeowners can reduce the costs that come with home maintenance, repairs, and remodeling. Here are tips to start saving:

Do Preventative Maintenance

By taking proactive steps to maintain your home's systems, you can catch minor issues before they become major repairs. This includes tuning up your HVAC yearly, sealing cracks and holes where pests can enter, cleaning gutters, and more.

Take on DIY Projects

Not all home projects require a professional. Many handy homeowners can tackle minor plumbing repairs, paint touch-ups, landscaping, and more on their own. But know your limits - some remodels like electrical and kitchens should be left to the pros.

Compare Contractor Bids

Never go with the first bid when hiring for a home remodel or repair. Get at least 3 quotes from licensed professionals so you can find the best price.

Look into Financing

For large remodeling projects, companies like home improvement retailers often offer financing options. This allows you to complete the project while making smaller monthly payments over time.

Home Improvement Budgeting Guides

Read some of our guides to learn more about financing and budgeting for home improvement, renovations, and general repair projects.

Ask About Warranties

When hiring contractors for remodeling projects, ask if they back their work with any warranties. This guarantees their labor if issues pop up.

Get a Home Warranty

Home warranties provide affordable protection by covering repairs and replacements for your home's major systems and appliances when they break down. This can save thousands in repair bills.

Our Home Warranty Reviews and Top Picks

We've done the research and scored dozens of home warranty companies on a number of factors, including customer service, plan options, and cost to review and rank our top picks.

Below are our top 4 home warranty picks nationwide. Get free quotes to find out which one fits your budget best.

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Best Value

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Get Comprehensive Home Insurance Coverage

In most cases, you'll have to purchase a homeowners insurance policy when buying a home, since most lenders require it. That being said, it's important to make sure you have the full coverage you need for if there's a disaster that impacts your home.

FAQs About Home Financing

How much should you budget for home maintenance each year?

On average, you should budget 3-4% of your home’s total value for annual maintenance and repairs. For a $200,000 home, that’s $6,000-$8,000 per year.

What are some tips for financing large home remodels?

Get multiple bids and look into financing options offered by home improvement retailers. Also ask contractors about any labor warranties they provide in case issues arise.

What does a home warranty cover?

Home warranties cover repairs and replacements for major home systems like HVAC, plumbing, electrical, appliances, and more. Warranties provide protection in case these items break down.