Home Warranties

What Borrowers Should Know About Home Warranties

Many homeowners, especially those new to the home buying world, do not know about home warranties. Therefore, many cannot make an informed decision on whether or not it is right for them. Home warranties are an option for any homeowner, whether the home is new or not; so learn the basics of home warranties and you can decide for yourself whether it's the right decision for your home.

What is a Home Warranty?

Similar to an insurance plan, home warranties are typically a one-year renewable service guarantee. This guarantee protects a homeowner's budget from unexpected, expensive repairs to home systems or appliances. Newly built homes will generally have a warranty from the home builder, and warranties can be purchased when buying or selling an older home.

If an appliance breaks, the warranty company will send a repairman of their choice to the house to look at the problem. The homeowners pay a deductible/service fee, but the warranty provider should cover a large portion of the repair cost.

What Does a Home Warranty Cover?

Warranty providers can have their own variations of warranty coverage, which may also vary by region. In general, basic plans typically include coverage for kitchen appliances such as your oven, dishwasher, built-in microwave, electrical, plumbing, water heater, and more.

An enhanced warranty is usually needed to cover the air conditioning system, refrigerator, and washer/dryer. You can also pay for optional coverage of items such as a swimming pool or septic system.

Compare home warranty companies and policies with Consumer Affairs.

Home Much Does a Home Warranty Cost?

Just like any financial decision, you should do your research and get quotes from local warranty companies. Home warranties are generally similar in price. Warranties bought for older homes may vary in cost from $350 to $500 for a basic one year warranty and an extra $100 to $300 for extra protection. Deductibles/service fees can range from around $50 to $125 on average each time you call for repairs.

Purchasing a warranty for buyers can be a great incentive; but even if the seller doesn't make that concession, the buyer can still purchase the warranty and have peace of mind in their new home.

Home Warranty vs. Insurance

Many buyers believe they only need home insurance and don't think about what the insurance program won't cover. Home insurance will protect homeowners financially in the case of a fire, theft, or damage to your house or personal belongings. But you won't be able to make a claim if your dishwasher leaks or your heat pump fails.

As with any legal document, please read all of the terms and conditions of a warranty before determining whether it is a good investment. There are limits to every policy, so don't assume the plan will cover everything in the home. Read and understand what the plan. There may be limitations of the policy so don't be surprised by fees or out of pocket service costs.

We are always available to answer your mortgage-related questions and we would love to hear from you. Contact us today!