Question

The Davis family purchased a house last year. They put $20,000 towards a down payment and took out a $265,000 mortgage. Because it was a new home, all the repairs and maintenance were covered under the builder’s warranty, but the Davises want to budget this coming year for unexpected expenses. When estimating costs for home repair and maintenance, a good estimate is to budget 1% of the purchase price of a house. What would be a good yearly estimate of repairs and maintenance for the Davis family’s home? a. $28,500 b. $2,650 c. $2,850 d. $200.

Answer 1

Budgeting is the earning of the estimated income and its expenditure on various bills and daily utilities. For maintaining a balance of income, budgeting is done so that expenses do not exceed the income.

$2,850 is a good yearly estimate of repairs and maintenance for the Davis family’s home.

How to estimate repair and maintenance?

Given,

• Down Payment = $20,000
• Mortgage = $265,000
• Purchase price of the house = $285,000

1% of the purchase price is budgeted for repair and maintenance (X) and will be estimated as:

$\begin{aligned} 1\% &= \dfrac{\rm X}{\ 285000} \times 100\\ \\ \rm X &= \dfrac{1\% \times \ 285000}{100\%}\\ \\ \rm X &= \ 2850\end{aligned}$

Therefore, option c. $2850 is the repair and maintenance cost.

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