5 Questions You Need to Ask Before Buying a Home Repair Warranty

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

home repair warranty

When you become a homeowner, you’re ultimately on the hook for costly repairs. If something goes wrong in your home, whether it’s a leaky roof or a broken appliance, you could be looking at a big bill.

A home repair warranty could help cover some major unexpected expenses. However, there are different kinds of warranties, and some provide better service coverage than others.

Here’s what you need to know about how home repair warranties work and their pros and cons. Consider these five questions when deciding whether buying such a warranty is the right choice for you.

1. What is a home repair warranty?

Home repair warranties are either provided by builders or can be purchased from private warranty companies. They cover the repair or replacement of items in a home in the event of breakage and are separate from homeowners insurance policies that cover a home or its contents in the event of a fire or natural disaster.

It’s common for builders to provide a warranty on a newly constructed home. The Federal Housing Authority (FHA) and Department of Veterans Affairs (VA) “require builders to purchase a third-party warranty as a way to protect buyers of newly built homes with FHA or VA loans,” the Federal Trade Commission says.

Additionally:

  • Homeowners can buy a home repair warranty themselves.
  • Home sellers might offer a home repair warranty to sweeten a deal for buyers.
  • Real estate agents might buy home warranties for clients as a customer service perk.

Home repair warranties can provide comprehensive or limited coverage. For example:

  • For newly built homes, warranties typically might cover problems with workmanship or materials on most components of the home, such as drywall, plumbing, or major structural defects, for a period of one to 10 years.
  • For existing homes, a warranty might cover everything that goes wrong except for routine wear-and-tear issues or might cover only specific appliances, heating, and cooling systems.

The more comprehensive the warranty, the more costly it will be. Warranties last for a limited time, and they often have lots of restrictions on factors such as who can make repairs or what brands of replacement materials can be used.

2. How much does a home repair warranty cost?

If you’re buying a newly built home, a builder’s warranty often is required, so the cost is baked into the purchase price of your home.

However, if you’re considering negotiating for a home warranty to be included with an existing home you’re buying or if you’re thinking of buying a warranty for your home, you’ll need to make sure it’s worth the money.

Home warranties typically cost between $300 and $800 in the first year, according to Zillow, but the price can be higher for more comprehensive coverage or longer warranties. Warranties also typically have deductibles or copays between $50 and $125, which you might be required to pay every time a repair person comes to your home to address a problem.

3. Is buying a home repair warranty worth it?

Repair costs on the major components of your home, such as your heating, ventilating, and air conditioning system or appliances, can be high. While you might want to protect yourself in case of expensive repairs, home warranties often don’t do a good job of shielding you from costs.

To decide if a home repair warranty is worth it, consider the following:

  • What’s actually covered? Read the fine print to understand exactly which components of your house and items are covered by the warranty. Be aware there can be unexpected exclusions. For example, Consumer Reports warns that some home warranties cover the refrigerator but not its built-in icemaker.
  • Under what circumstances are you covered? Your policy might exclude coverage under certain circumstances, such as if an oven broke while in self-clean mode.
  • Do you already have coverage? For example, if appliances are newer, they might be covered by a manufacturer’s warranty, so you won’t need additional coverage by a home repair warranty.
  • How are repairs made? Find out if the warranty requires you to use a particular contractor or if there are there restrictions on repairs for certain parts.
  • Will damaged or broken items be repaired or replaced? Some warranties deny coverage for expensive repairs and instead reimburse you only for the depreciated value of the broken item. Then you’d end up paying out of pocket for the replacement.
  • Does the warranty limit payouts? Consumer Reports found some warranties set maximum payout amounts for certain types of repairs.

If your items are covered by a manufacturer’s warranty, you don’t need to buy an additional home repair warranty. If you don’t have coverage for particular components of your house, a warranty is useful only if it doesn’t include too many limitations making it impossible to use.

4. What are the pros and cons of home repair warranties?

The biggest benefit of home repair warranties is that expensive repairs are covered if your policy is comprehensive enough and something goes wrong during the warranty period.

However, because so many policies make it hard to get repairs covered, you might waste money on a warranty that doesn’t cover what you need.

According to Consumer Reports, many complaints are made to the Better Business Bureau about home warranty companies because lots of homeowners find it difficult to get repairs covered.

If you want to reap the benefits of a home repair warranty, it’s important to shop carefully for a policy. You might even consider having a lawyer look over the warranty to make sure it will cover you if something goes wrong.

5. What can you do instead of getting a home repair warranty?

If the drawbacks of a home repair warranty turn you off, here are a few other options you can pursue to avoid costly home repairs.

  • Pay for a thorough home inspection before purchasing a home: A home inspector can spot problems you might not be able to. You can negotiate to have the current owner fix any issues a home inspector finds or get the price reduced on the home so you’ll have money for repairs.
  • Self-insure to fund repairs: Put the money you’d have spent on a home warranty into a savings or investment account earmarked for home repairs. Many financial experts recommend setting aside an amount equal to 1% of your home’s total value each year for maintenance and repairs. So on a $250,000 home, you’d save $2,500 per year to cover repair costs.
  • Consider an affordable personal loan: If you don’t have enough money for home repairs, look for affordable home improvement loans to finance any necessary expenses.

It’s smart to make a plan to pay for repairs as a homeowner. But before you decide that buying a home repair warranty should be part of your plan, read the fine print on any service contract you’re considering to see whether the coverage is worth the price you’ll pay.

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1 Includes AutoPay discount. Important Disclosures for SoFi.

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  1. Personal Loans: Fixed rates from 5.950% APR to 14.740% APR (with AutoPay). Variable rates from 5.825% APR to 14.365% APR (with AutoPay). SoFi rate ranges are current as of May 18, 2018, and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.825% APR assumes current 1-month LIBOR rate of 1.90% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
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2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 4.99% – 16.24% (4.99% – 16.24% APR) based on applicable terms. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.