Will A Home Warranty Work for You?
No one likes being surprised by unexpected expenses, especially if they’re potentially avoidable. Unfortunately, part of being a homeowner is accepting the responsibility of paying for repairs when that time comes—and it will. This makes a home warranty an important asset when buying a house.
Despite not knowing when or what your next home repair will be, there are ways to prepare. One popular way is a home warranty. While it can offer added protection for your property, it’s important to understand the strengths and weaknesses of a warranty before deciding if one is right for you.
What It Is
A home warranty is a type of service contract that typically costs around $500 per year, depending on the provider. It is intended to cover at least part of the cost to repair or replace specific working systems in your home, including appliances, HVAC systems, plumbing fixtures and more.
If a covered item stops working, you place a claim with the home warranty company. They will dispatch an affiliated repair technician to assess and repair the problem. While there is usually a deductible or service fee charged for each repair occurrence, additional costs are paid by the warranty company. These service charges will vary by policy and are likely to range from $25 to $100.
Because of the added peace of mind they can provide, home warranties are a useful negotiating tool when buying or selling a home. The added incentive they create can be especially reassuring to first-time homebuyers or make an older home a more attractive option.
What It Isn’t
First and most importantly, a home warranty is not a guarantee against repair expenses. There are likely to be many items excluded from the policy, and certain parts within a covered system may also be exempted, resulting in hefty repair bills. A warranty should not be a replacement for a proper inspection, either, since pre-existing problems will not be covered.
In addition, it is not an insurance policy since it won’t provide protection against accidental or intentional damage, weather-related mishaps or theft. Nor will it provide coverage for personal belongings unrelated to the function of the home, such as furniture, jewelry or clothes. For these items, a comprehensive home insurance policy would offer the appropriate protection.
Read the Fine Print
While skipping over the terms and conditions of an agreement is a bad habit many of us share, shopping for a home warranty is most definitely a time to pay attention to the details. Common sense reveals that the reason these contracts are available is because the sellers are profiting from them. This means many buyers are paying more than they’ll ever receive in benefits. Often, this is accomplished by limiting coverage or excluding the parts most likely to fail. Before agreeing, make sure you understand precisely what the warranty will cover, and which items remain unprotected.
And remember, buyers of newly constructed or renovated homes may find that a warranty duplicates the manufacturers’ or builders’ coverage and is mostly unnecessary. However, owners of older homes with systems nearing the end of their lives, or first-time homeowners looking for some added confidence, could find it worth the cost.
If you’re in the market for your next home, Open Mortgage is ready to help. Let our experienced originators match you with a mortgage you can count on. Find out more at OpenMortgage.com or call today.