Estimating annual home-maintenance costs (© Kim Steele/Digital Vision/Photolibrary)

If you’re thinking about trading up to a bigger home, or moving from renter to homeowner, you’ve probably done a lot of math.

But one key figure is devilishly hard to project and is often overlooked: If you buy a home, how much will you shell out every year for maintenance and repairs? A careful look at these potential costs might discourage you from buying a more expensive property or might make renting look more appealing than it would seem otherwise.

There’s no way to forecast these costs for sure. But mortgage-data firm HSH Associates suggests that homeowners assume they will come to about 1% of the property’s value — every year.

That’s $3,000 on a $300,000 home. To be on the safe side, you should probably use that as a minimum. So let’s say $4,000, and assume you’d also need a healthy cash reserve for any big expense that homeowners insurance doesn’t cover, such as a new furnace or roof.

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A $4,000 annual maintenance and repair budget is $333 per month. 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's Mortgage Loan Calculator.

A $333 monthly maintenance and repair budget would equal nearly 27% of your principal and interest payment. That stings!

Read:  September home-maintenance checklist

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.

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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.

Granted, maintenance and repair expenses are unavoidable if you own a home, and if you rent they’re built into your rent, and your annual rent increases.

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The point is there’s a lot of money involved. It’s too much to be shrugged off as an incidental when you’re deciding which home to buy or whether to keep renting.

If your lender suddenly said your monthly payment would be more than 25% higher than you’d expected, you might go into shock.  It would be foolish to buy a home without including the inevitable maintenance and repair costs in your budget. Also keep in mind that maintenance and repair do not include upgrades, such as the new kitchen or bath you may someday want to keep up with the styles.