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Are Home Warranties Worth The Money?

Sammamish Mortgage
Published:
November 27, 2020
Last updated:
February 26, 2021
Have You Considered A Home Warranty Yet

For many homeowners having a warranty in place may be a good thing, while for other homeowners, a warranty may just be an additional cost. If you are in the process of home shopping or have just purchased a new home, you may be wondering if home warranties are worth it? Well, in this article, we’ll go over the pros and cons of home warranties plus whether or not one is right for you.

In This Article

Those who own homes might regularly receive mail advertising for a home warranty. Many people end up tossing these leaflets away because they think this is just another form of home insurance, which people often get through their mortgage lender. In reality, a home warranty is not home insurance; and, now that you know there is a difference, you may be wondering what exactly is a home warranty then and is it worth the money?

What Is A Home Warranty?

A home warranty provides homeowners assurances that repairs will not cost an arm and a leg. That said,  home warranties tend to get confused with insurance because similar to insurance, people must pay a set premium per year to protect them against the risk of larger expenses down the road. Overall, a home warranty or policy covers certain items and home appliances. This means that the cost to repair or replace certain appliances or home systems if they are damaged or break down may be completely or partially covered with a warranty. Usually, If someone needs to file a claim, they can do so online or over the phone. Once the claim is filed, a professional or contract repair person will come out, and the homeowner pays a service fee (which is similar to a deductible) to get the repair completed. In some cases, the homeowner will have to pay the entire bill and get reimbursed later.

What are the Advantages of having a Home Warranty?

One of the main pros of purchasing a home warranty is that flat rate fixes can help save you money. For instance, especially when it comes to older homes, you never know exactly what possible problems or issues are lurking behind your home’s walls. Of course, before you close on a home, you should have it inspected so that you are aware of all issues ahead of time. That said, in the event that later down the road, you do have unexpected repairs that pop up, then the home warranty can help potentially save you money because of the flat rate fixes. Typically, a flat rate fix is a part of your policy that says maybe you only need to pay $100 for repairs, whereas the actual work itself would normally cost you thousands of dollars.

Yet another advantage of having a home warranty is that it offers you peace of mind. Moreover, most policies are relatively affordable, and therefore even if you do have unexpected home repairs, you can still manage your monthly budget. In general, most warranties only cost $300 to $500 per year, and with a flats rate fix of say $100 (in the event that you need to use your warranty), you can rest assured knowing that you will not have to fork up thousands of dollars for repairs.

Do the Advantages Outweigh the Disadvantages?

On the other hand, home warranties have obvious drawbacks. For instance, many people finding themselves asking are home warranties worth the money, especially because home warranties exclude certain repairs. Usually, home warranties rarely cover acts of nature or God, i.e., if there’s a flood or a tree crashes through your roof, don’t expect your home warranty to cover such things. What’s more, home warranty companies often work with certain repair companies.  Thus, as the homeowner, you lose a little control over the repair process, especially when it comes to choosing who will make the actual repairs. In order to avoid this particular issue, you can do additional research on your warranty companies to see who they work with ahead of time. Nonetheless, this involves extra work on your part.

Besides excluding certain repairs and working with specific repair companies, the majority of available home warranties tend to cover only repairs instead of replacements. If, in fact, they do allow for replacements of broken or damaged appliances, there tends to be a lot of red tape in order for you to have items replaced instead of repaired.

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Is The Home Warranty Worth It?

In general, if someone has purchased a brand new home, this policy simply isn’t necessary. In many states, the builder is required to repair defects for a few years after the home is built. The common time-frames range from two years to ten years. Therefore, a home warranty might be duplicate coverage and, thus, unnecessary. Furthermore, brand new appliances are almost always protected by one or two-year warranties. Again, a home warranty might be duplicate coverage.

Alternatively, if someone has an older home or older appliances, the home warranty might be worth it. Older appliances are more likely to break down and, thus, require repairs. Therefore, people need to think about their own individual circumstances and weigh the risk of a broken appliance against the cost of the policy. A home warranty may be right for some people but not others.

How Do You Find the Right Home Warranty?

After weighing the pros and cons, you may decide that home warranties are worth the money when it is all said and done. Thus, in order to find the best home warranty for your needs, you need to do your research. This means comparing several companies, determining what kind of coverage you need, and getting quotes from reputable companies. If you do not know where to begin your search or need some guidance along the way, then consider speaking with your mortgage lender. That said, while you are price comparing and policy shopping, it is crucial that you understand the coverage that is available. You should know exactly what will be covered as well as what the fine print says. Ultimately, you need to be clear on what happens when you utilize your home warranty—this includes understanding reimbursement policies in the event you have to pay for the entire repair or the next steps when a broken item cannot be fixed.

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Ready to Apply For a Mortgage in WA, OR, CO, or ID?

Are you currently home shopping and considering financing, home warranties, and more? Are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.

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