People are regretting buying a home due to high maintenance costs, but a home warranty can save you money

People are regretting buying a home due to high maintenance costs, but a home warranty can save you money

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

Shantelle Burton, REALTOR® for Historic and Distinctive Homes, told Insider that buying a home warranty is a good move for buyers who are worried about maintenance costs.

Home warranties can save you money on home repairs, and though many people get it when they close on a home, you can still purchase a warranty after you’ve bought the house.

What is a home warranty?

A home warranty is a policy that gives you discounts on home repairs and sometimes on replacing appliances.

Home warranties are different than homeowners insurance. Homeowners insurance covers things like the structure of your house and items within the house. For example, if a tornado hits your house, homeowners insurance will cover repairs to the structure and the costs 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 large issues like repairs to your plumbing, HVAC system, water heater, and electrical system.

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

How does a home warranty work?

When you need maintenance repairs, you’ll file a claim with your home warranty provider, either over the phone or online. The provider finds a company to take care of your problem, and that company contacts you to set up an appointment.

The annual cost of a home warranty depends on the provider and policy, but it typically runs from $350 to $700 per year.

You’ll also pay a small fee when someone comes to your house, usually around $75 to $125. This is sort of like how you pay annually for health insurance, but you still make a copay when you visit the doctor. Providers will also only cover up to a certain dollar amount per repair or replacement, depending on the appliance.

You’ll need to decide whether you expect the costs of a home warranty to actually help you save money. For instance, 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 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 issues, you’ve only paid $700 toward home maintenance for the year.

If you haven’t closed on the house yet

If you’re in the process of buying a home and are worried about the costs of maintenance later, you may want to purchase a home warranty. You’ll likely pay for the warranty at closing.

“I would recommend doing it at closing,” said Burton, “because usually the listing realtor can get a discount with most companies with purchasing it for you.”

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

By signing up for a policy at closing, you’ll be covered from day one of homeownership.

If you’ve already closed on the house

Maybe you relate to the 21% of millennials who regrets buying a home in this hot market due to the costs of maintenance. Good news — if you didn’t get a home warranty policy at closing, you can still buy one at any point after buying the home.

You won’t get the potential benefits that come with buying one at closing, like a realtor discount or the seller covering the costs. But you still may save thousands of dollars while living in the house.

About the author

Laura Grace Tarpley is an editor at Personal Finance Insider, covering mortgages, refinancing, and lending. She is also a Certified Educator in Personal Finance (CEPF). Over her five years of covering personal finance, she has written extensively about ways to navigate loans.

Published at Sat, 12 Jun 2021 13:41:00 +0000