How a Home Warranty Can Save You Money on Home Maintenance

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A recent research from Bankrate found that 64% of millennials regret buying a home in today’s hectic housing market. More specifically, 21% regret the purchase because the maintenance and related costs are too expensive.

Shantelle Burton, REALTOR® for Historic and characteristic houses, told Insider that buying a home warranty is a good move for buyers concerned about maintenance costs.

Home warranties can save you money on home repairs, and while many people get it when they close a home, you can still buy a warranty after you buy the home.

What is a home warranty?

A home warranty is a policy that gives you discounts on home repairs and sometimes on appliance replacements.

Home warranties are different from homeowners insurance. Homeowners insurance covers things like the structure of your home and items in the house. For example, if a tornado hits your home, homeowners insurance will cover structural repairs and the cost of items that are damaged.

A home warranty, on the other hand, covers repairs and replacements of appliances in your home. Warranties vary by provider, but most cover major issues such as repairs to your plumbing, HVAC system, water heater, and electrical system.

Some also cover appliances such as your washer, dryer, and refrigerator. Decide what you want covered by a home warranty before choosing a policy.

How does a home warranty work?

If you need maintenance repairs, file a claim with your home warranty provider by phone or online. The provider will find a company to solve your problem and that company will contact you to make an appointment.

The annual cost of a home warranty varies by provider and policy, but typically runs from $350 to $700 per year.

You also pay a small fee when someone comes to your home, usually around $75 to $125. This is similar to how you pay annual health insurance, but you still pay a deductible when you go to the doctor. Providers also only cover up to a certain amount per repair or replacement, depending on the device.

You need to decide whether you expect the cost of a home warranty to actually help you save money. For example, maybe your dishwasher breaks in January and your HVAC needs repairs in May. You pay a $500 annual fee for your home warranty, plus a $100 fee to each company, or $700 in total.

Let’s say a new dishwasher would cost $1,000, and HVAC repairs would cost $300. Instead of paying $1,300 to fix both problems, you’ve only paid $700 for home maintenance this year.

If you haven’t closed the house yet

If you are in the process of buying a home and later worry about maintenance costs, you can purchase a home warranty. You will probably pay for the warranty at closing.

“I’d recommend doing it at closing time,” Burton said, “because the broker can usually get a discount from most businesses by buying it for you.”

Sometimes the seller will cover the cost of a home warranty at closing, especially if the seller won’t pay for any of the repairs you request before closing.

By signing up for a policy at closing, you are covered from day one of home ownership.

If you’ve already closed the house

You may recognize the 21% of millennials who regret buying a home in this hot market because of the cost of maintenance. Good news: If you didn’t get a home warranty policy at closing, you can still buy one after you buy the home.

You don’t get the potential benefits that come with buying one by closing, such as a broker discount or the seller covering the costs. But you can still save thousands of dollars while living at home.

About the author

Laura Grace Tarpley is an editor at Personal Finance Insider covering mortgages, refinancing and loans. She is also a Certified Educator in Personal Finance (CEPF). During her five years covering personal finances, she has written extensively on ways to deal with loans.

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