6 Types of Reserves Homeowners Should Create!

Many people are drawn to join the so-called American Dream and own their own home! As a real estate licensed salesperson, New York State, for over 15 years, I have witnessed many underprepared homeowners, who end up, are, Home – Rich, but financially – poor! This often happens because they do not have the necessary knowledge to effectively and thoroughly prepare for several important realities associated with home ownership! While many realize that they will need enough money for the down payment and closing costs, many do not think about other financial needs and do not prepare properly. With that in mind, this article will attempt to briefly consider, research, review and discuss 6 types of reserves that savvy homeowners should create and prepare for.

1. 6 Month Mortgage Payments: Doesn’t it make sense to be prepared for whatever life throws at us, and have at least six months’ worth of mortgage payments, set aside and readily available? Contingency planning is the smartest approach!

2. Reserve for unforeseen contingencies/events: Although we realize that at some point we will have to replace appliances, roofing, etc., we often don’t think about preparing for possible, unexpected events! What if, for example, you have to pay for damage that exceeds the insurance coverage, and also have to meet the deductibles? There are countless examples of this kind of possibilities!

3. Device Reserves: Don’t be surprised if you need (or want) to replace some appliances, such as refrigerators, dishwashers, ovens/stoves, washing machines, dryers, etc.! It’s wise to have a spare ready, when this happens!

4. Main System Reserves: The main systems of a home include: HVAC (heating and air conditioning); plumbing, roofing, sewerage, etc. This can often involve larger than expected costs, which must be planned for – for!

5, repairs: The difference between repairs and renovations is often that the latter is voluntary, while the former may not be expected! Some repairs can be minor while others can be major! Homeowners often find the need to repair items such as plumbing leaks (pipes, toilets, etc.), exterior damage (including entryways, walkways, etc.), periodic painting (interior and exterior), roof repairs, etc.

6. Upgrades/Renovations: People often want to upgrade certain areas of their home, especially the kitchens and bathrooms! This includes: kitchen cabinets; replacing floors and counter tops; bathroom vanities; whole house painting / re-flooring / carpeting, etc. Some decide to renovate spaces, including: enlarge / extend, etc.

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Savvy homeowners are preparing so they can reduce stress by having cash available when needed. Using specific, dedicated reserves is often a wise process, etc.!