One of the first things you learn as a new homeowner is just how expensive it is to own a home. There are lots of hidden costs associated with owning a home that don’t go away once the closing documents are signed.
Your monthly mortgage payment is just a part of the picture. When you first move into a home, you can easily find yourself hemorrhaging money as you rush to buy all the odds and ends that you need to be comfortable in a home — everything from new furniture to power tools and toilet plungers. And there’s so much that can go wrong with a home, especially if you’ve inherited the previous owner’s major appliances. A home warranty can help defray the costs of repairing, replacing, and maintaining your home’s major systems and appliances, and make it easier to fit these costs into your monthly budget.
Home Maintenance Costs Are Unpredictable — And Not Covered by Home Insurance
If you have a mortgage, your lender will likely require that you carry homeowners insurance — and even if you don’t have a mortgage, insurance is essential to protect your investment in your real estate. But homeowners insurance typically only covers your home’s structure against catastrophic damage and your home’s contents against theft. There aren’t typically any riders that can add repair and replacement coverage for your home’s major appliances and systems, like electrical and HVAC.
That’s a niche filled by home warranties. Home warranties cover what homeowners insurance doesn’t — normal wear-and-tear damage to appliances and home systems. When your refrigerator stops running or your HVAC breaks down, you need to call your home warranty company, not your homeowners insurance — if you have a home warranty, that is.
And you should have one, because home maintenance can get spendy quick. Personal finance experts recommend saving one to four percent of your home’s value to cover maintenance costs each year, and that can be quite a lot of money, even if your home is quite modest. Nor is there any way to predict when a breakdown will occur — it could be after you’ve had a few years to save, or it could be the week after closing. Chances are, it will be sooner rather than later, especially if your home is older with older appliances. Whether you purchase a home warranty or have one gifted to you by your home’s seller or realtor, the coverage can be a lifesaver when the inevitable happens and something unexpectedly breaks down.
Budget More Effectively for Home Maintenance Costs
It can be hard to budget for home maintenance, especially because you never know when a breakdown will occur. And there might be some years when you’re perfectly capable of setting aside the recommended one to four percent of your home’s value, but other years where you’re not as stable and need to focus on just staying afloat. In both circumstances, though, a home warranty can make budgeting for home repairs easier.
When you buy a home warranty, you’ll know how much you can expect to pay each month for plan costs, and you’ll know what you can expect your trade service call fee to be. If something breaks down, you’ll pay your trade service call fee, and any additional costs will be covered up to your plan limits. That makes budgeting for home maintenance as easy as budgeting for any other bill — you just plug the amount into your budgeting app and go on with your life.
But that’s not the only reason a home warranty can protect your budget. The big threat to your budget isn’t the monthly amount you pay for your home warranty, or set aside in savings. It’s the huge bill that comes after an unexpected repair. If you don’t have enough saved in your home maintenance fund to cover it, you’ll have to do some creative accounting to figure it out — and might end up doing without other necessities, or going into high-interest debt, if you can’t find the money elsewhere. A home warranty can defray these costs, to protect your savings and your budget alike from the devastating impact of a large, unexpected bill.
The upfront costs of a home warranty are negligible when compared to the cost of repairing or replacing just one major home appliance. A single repair could allow your home warranty to pay for itself, and most households need to have multiple repairs done each year. Protect your finances, your peace of mind, and your family’s lifestyle with a home warranty.
