Should You Buy A Home Warranty?

October 13, 2020
Last updated:
April 6, 2022
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When you buy a new house, the first thing you want to do is protect your investment. After all, a home is likely the most expensive asset you will ever buy, so it would be in your best interest to protect its value. That’s why you have property insurance. Not only is homeowners insurance required to take out a loan as per the lender, but it will also help cover the expense of repairing or replacing your home and its belongings if it’s ever damaged or the subject of theft.

But should you also buy a home warranty?

What Is A Home Warranty?

A home warranty is not the same thing as insurance. Home warranties are service contracts. If a covered item breaks down and it is covered in the terms of the warranty, the home warranty company will pay to fix or replace that item. For instance, if your HVAC system in your Idaho or Oregon home is covered for 5 years but breaks down before that time period expires, any home warranty that you have with this stipulation will cover the costs associated with repairing or replacing the system.

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What is Covered Under A Home Warranty?

Every home warranty contract is different but generally, a home warranty may cover items like major kitchen appliances, HVAC components, sump pump, in-home sauna or spa tub, and/or ceiling and exhaust fans.

Often, a homeowner in Seattle or Denver can get an extended warranty contract that covers items like the washer and dryer, garage door opener, septic system, and swimming pool components. That means you can pay to have your warranty extended to cover a longer period of time than what the standard warranty covers. This is an option you have when you buy a new home and is not required.

Understand The Costs

A basic home warranty costs between $350 and $500 annually, depending on what coverage you get. However, if something does break, you will also be on the hook for incidentals like service call fees or a deductible. It’s important for you to crunch the numbers and determine if it makes financial sense for you to pay the extra few hundred dollars every year for a warranty, or to take a chance and only pay for repairs as they occur. In the case of the latter, you would be required to pay for such repairs out-of-pocket.

Know The Benefits

There are considerable benefits to having a home warranty contract in place, especially when something expensive breaks down, like a furnace. Replacing a furnace can cost you anywhere from $2,500 to as much as $8,000 or more. Certain components and systems are extremely expensive, so paying a few extra hundred dollars a year to ensure they are covered might be worth it. There is a lot of peace of mind knowing that you will be able to quickly get something fixed in your home in Portland or Boise.

You Might Already Be Covered

Your homeowner’s insurance policy might cover some of the same things that are covered with a home warranty. So you could be paying for duplicate coverage on some items. That’s why it would be wise for you to review your current homeowner’s insurance policy before you agree to buy an extended home warranty.

However, your homeowner’s insurance likely will not cover a dishwasher that needs to be replaced or a fridge that suddenly goes out.

There Are Alternatives

Finally, before you pay for a home warranty in Washington or Colorado, remember that there are alternatives. For example, most HVAC companies offer financing options to buy a new furnace. Most appliance stores also offer financing on major purchases like refrigerators and dishwashers. You could save your $500 or so a year and put it in a savings account for a rainy day instead of gambling that you might have a major repair or purchase that year.

There are pros and cons to home warranty plans. Just be sure you fully understand both sides of the issue before you sign on the dotted line.

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Ready to Buy a Home and Apply For a Mortgage?

Are you thinking of buying a home this year? Sammamish Mortgage can help. We are a local mortgage company serving the broader Pacific Northwest region, including Washington state, Idaho, Colorado, and Oregon. We are proud to provide several mortgage programs and products with flexible qualification criteria. Please contact us if you have any questions or are ready to start the mortgage application process.

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