Buying A Home
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Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
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Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
House emergency fund?
DH and I are getting ready to buy our first home sometime in February or March. I know we should have a house emergency fund for unexpected repairs, but I'm not sure how much we should have. Do you think 5-6k is enough for a home in good condition with a newer roof, floors, siding and HVAC system?
Re: House emergency fund?
Typical recommendation is 3-6 months of expenses. It's not just about things that can break in the house, but also everything else that could go wrong and the end result could be losing the house. For example, of one of you lose your job, total a car, etc.
Also depends how much your homeowners deductible is. On our last house the deductible was $6k so we definitely wanted more than that.
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I'd strive for 6-8 months of ALL monthly expenses in your efund.
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A 6k deductible is a lot higher than I'm expecting. My parents live in our area and their deductible is 500 or in the case of a hurricane 3% of the home value. We will only have 2 months of expenses saved, but we have fantastic job security, good car insurance, low deductible health insurance, and a mechanic that works for free in the family. I can't realistically see us needing a huge emergency fund, especially for things unrelated to the house. In fact we've never had an emergency cost us more than $600 tops. A lot of people have said they ran into unexpected repairs when they moved into their house, even when it was new. I'm trying to figure out what we realistically need to come up with for unexpected home repairs rather than unexpected life emergencies.
If you only strive to have the "minimum," saved, then you are setting yourself up for a financial disaster if something unexpected comes up. Do you really think people "plan" to have unexpected life emergencies? That is why it is called an emergency fund. Personally, I prefer to be in a better financial position if an emergency (home or life) comes up. So again...6-8 months of ALL monthly expenses.
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i read somewhere to put aside 1% of the purchase price of your home annually for home-related improvements, maintenance, and emergencies. however, not sure how well that works out for those in LCOL with very low purchase prices. when doing the math for my HCOL area, 1% of the purchase price seems to make sense.
we are saving that 1% on top of our regular "life" emergency fund (we've got about 7 months' worth in there), which you should strongly consider beefing up despite your relative current stability. you never know what can happen.
Some examples of unexpected repairs:
Mold (hidden at inspection and then poof) - Costs Thousands and can happen in new homes too!
New Air conditioner or roof goes kaput! Thousands
Home Owner deductible - Parents may have $500 but insurance may not give you and DH the same depending on how long you have been using that insurance company.
Our water heater broke in the basement this year (Was newer and cost thousands as it went under all of the nice floors and into walls). Because of this our $500 deductible was raised into the thousands.
Get into accident and you get sued :-( Hope not but you never know.
You or DH gets really sick or in serious accident and can't work. Need money to pay for everything.
Buy a house and think everything is just great because inspection was wonderful and find out you have a huge crack in your foundation.
Bottom line is that anything can happen or not. $5,000 is just not much in the bank.
Thank you! This is what I need to know. This gives me a better idea of what I need to research and prepare for.
No one ever does. And yet...
6-8 months' expenses is awesome. It's conservative, and it's not mandatory, but I'd definitely say you should have 3-6 months' set aside for emergencies. If you have less than 6 months', you should have a budget line item for continuing to grow it.
It's one of those things that's really better to have before you buy the house, because it's a lot harder to build it up after you have the house, and you have improvements, repairs, upgrades, etc. competing for your financial attention.
Our oil burner was well within the life expectancy and sprung a leak and had to be replaced months after moving in. That was $8K or so just like that.
In fairness, my house is over 80 years old, but the oil burner was "young".
So, I was glad we had saved more than enough to cover.
Things come up, and they all cost a lot more than you think they will! I think 3-6 months worth of all expenses at a minimum ... 6-9 months would be better.
We bought a 4-year-old house. In the first two years, we had the following unexpected things come up:
Washing machine motor malfunctioned and nearly caused a fire. Cost to repair was about the same as the cost to get a new one, so there went $1200.
Control board on wall ovens quit working, and since that's the most expensive part of the ovens to replace, repair cost was 75% of the cost of brand new ovens. So there went $2200 for new ovens.
Motor on the air exchanger quit working, repair cost $400.
Furnace quit working on a 4-degree day, cost for service call and repair was $360.
Husband had a freak accident where he fell down the stairs in the house, broke his leg, needed an ambulance ride & emergency surgery plus two nights in the hospital, out-of-pocket cost was $4,000.
I had a car accident on a bad winter weather day last March, spent $500 on the insurance deductible to repair my car.
If we didn't have significant savings, this could have really hurt us financially. Luckily, we save at a very conservative level and had plenty in savings to cover these costs.
This doesn't even include improvements we made like remodeling our master bath and adding a water softener and adding a whole-house humidifier.
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I appreciate all the advice. I've been looking over our finances and we can get our efund up to 7500 in time for a move in February. We have budgeted for planned home projects and we will continue to add to our efund when we move. We won't be able to add very much to that fund for the first 6 or so months though.
We could always keep renting and save more, but we would be holding off 2-3 years to save up the higher amounts that some of the posters have mentioned. Mortgage rates are low right now, and with ExxonMobile headquarters moving in nearby, I'm worried housing prices in the neighborhood we want will rise. I'm not sure the security of a bigger efund is worth the high lending rate and the higher home prices.
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