You’re buying a home. Should you buy a home warranty to go with it? It’s not unusual for sellers to offer to pay for a home warranty for a year as a perk for buyers. Real estate agents have also been known to provide a year’s warranty as a thank you. If you’re gifted a home warranty at no cost, there’s no reason to turn it down, but should you put down your own hard-earned cash to purchase one? That’s a trickier decision to make.
Should You Buy a Home Warranty?
People sometimes make the mistake of thinking that homeowners insurance and home warranties are interchangeable, but as Investopedia explains, they’re two very different things. Homeowners insurance is an insurance policy that protects a homeowner in the event that a major disaster like a fire, wind event, hailstorm, property crime, or limited types of water damage impact the structure of their home or their personal property. In contrast, a home warranty is a contract with a home warranty company that provides for the discounted repair of replacement of various components or appliances within a home. While homeowners insurance is often mandatory, especially if you have a mortgage, a home warranty is an optional purchase. But is it a smart purchase? Considering the pros and cons can help you decide.
The Advantages of Home Warranties
According to The Balance, peace of mind is often cited as the top benefit of home warranties. It can be comforting to know that you won’t have to face the expense of an unexpected repair alone. The idea of predictability can also be appealing. With set premiums and established deductibles for repairs, budgeting is easier. Plus, homeowners don’t need to worry so much about getting hit with huge surprise bills if they suddenly need to repair or replace vital systems or appliances.
The Downsides of Home Warranties
Home warranties do have their drawbacks, as MoneyTalksNews reports. For starters, they don’t cover everything. In fact, many of these warranties will not cover any appliance or system that wasn’t properly installed and maintained throughout its lifespan. This includes the time before the items were in the current owner’s care. If the previous owner of your home was lackadaisical about furnace maintenance, it doesn’t matter how carefully you’ve cared for it; your home warranty may not cover it when it fails. Home warranties may also require you to use a particular service provider. In addition, they may only agree to repair a component that you believe should be replaced.
When Should You Buy a Home Warranty?
How do you know if purchasing a home warranty makes sense? Magnify Money suggests that buying a home warranty from a reputable company can be a good idea in scenarios like the following:
- You’re not particularly handy. While home improvement shows can make completing projects around the home look easy, if you aren’t mechanically inclined or you lack experience with tools, it’s easy to get in over your head. With a home warranty, you have the option to request a service call when appliances make weird noises or systems shut down unexpectedly.
- Your new home comes with major appliances and systems that are older. Appliances and mechanical systems don’t last forever, and if the ones that came with your new home have some age on them, it can be tough to predict how long they’ll last. A home warranty can ease the pain if they fail.
- Your cash reserves are low. While experts warn about the dangers of being house poor, coming up with a down payment, closing costs, moving fees, and funds to outfit and settle into a new home can often leave your cash reserves running on fumes. If your savings are running low, having a home warranty can offer some protection against unexpected expenses.
Whether you’re a novice homebuyer or a real estate veteran, the loan experts at PrimeLending of Springfield, Missouri, would be happy to help you find the right loan product for your unique circumstances. After discussing your housing goals, we’ll work with you to explore your options, guide you as you select a loan that suits your needs, and stick with you through the approval process. To get started, contact us today.