How I save for home repairs without a home warranty

  • When my husband and I bought our first home, the sellers gave us a home warranty.
  • We were told the warranty would cover repairs and replacements for many things, including our furnace, A/C, and appliances.
  • But any time we tried to use the warranty, the company ultimately didn’t do the work.
  • Now, we have a home-repair savings account that we can dip into any time repairs are needed.
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I think I have a little PTSD when it comes to warranties. Whenever I buy something and hear the word “warranty,” I cringe a little and think things like: Does this really work? What do they not cover that they’re not telling me about? Do I really have time to sort through all the fine print?

When it comes to your home, there’s a warranty for that, too. Home warranties are probably the most important type of warranty because homes can be expensive to maintain. While the average person spends anywhere from 1% to 4% of the home’s purchase price on maintenance every year, this doesn’t necessarily include surprise repairs, like when something breaks or there’s a leak under the kitchen sink. 

When we did our walk-through inspection before buying our first home and found out the furnace was older than my husband (he’s 31), I was grateful that the sellers were willing to pass a home warranty along to us.

How home warranties work

The concept of a home warranty seemed almost too good to be true to me. Usually, warranties are reserved for things you buy brand new or maybe a used item like a car that has been thoroughly inspected and certified. 

How could a home warranty company cover items in my home that they’ve never seen or inspected? Well, here’s how it works. Homeowners can choose between a few different coverage plans, with the basic plan often covering the home’s major systems (like the furnace, A/C, electrical, plumbing). Then there are add-ons that can cover appliances like your washer and dryer, for example.

Sellers sometimes buy a home warranty for the next owner upon leaving as a courtesy, and likely so the new buyer doesn’t have to deal with costly repairs right after moving in. 

Typically, a home warranty can range between $350 to $600 per year depending on what your plan includes. Plus, you will have to pay a service fee ranging from $65 to $85 whenever you need a contractor to come out and diagnose a problem.

Our first problem with our home warranty

Not long after we moved in, our air conditioning stopped working. We quickly called our home warranty company and they sent out a contractor of their choice. When the contractor got to our home, he took one look at the A/C unit and said he couldn’t work on it because it wasn’t clean. According to him, they could only service units that had been maintained, and it would be an extra cost for him to clean it. 

We sent him back and my husband looked up a video on YouTube that showed us how to clean the A/C unit. Surprisingly, after we did this, it started working so there was no need to call the warranty company back. 

The next time we called our warranty company it was for our furnace; they sent a contractor who was a little more generous and willing to explain things to us. Our furnace needed a new part in order to work. This contractor actually wiped the unit down for us, saying that the warranty company would not approve the claim if they saw dust on the unit. 

He also warned us that, no matter what, the warranty company would never replace the furnace unit; he’d never seen them do this in all the years he’s worked with them. They always found a reason to not approve the claim. 

At this point, I was not surprised. Home systems and appliances are expensive. A home warranty company that charges only $500 annually and promises to replace all these things if they no longer work is taking a big risk — a risk that seems mathematically impossible for a profitable business.

Reading the fine print

Needless to say, we switched warranty companies the following year, and I made sure to do my research and read the fine print before agreeing to a new contract. I figured it was just the warranty company that our sellers picked out that was not helpful.

Unfortunately, after paying $500 for our new home warranty, I started to run into the same problems.

  • We had to work with the contractors they chose (some of whom did not seem qualified)
  • We still had to pay a $75 service fee for someone to come out
  • There were so many limitations as to what these contractors could actually do or fix
  • There are dollar limits for how much the home warranty company will spend on a system or appliance per year (the sky is not the limit)
  • Hidden deep in the contract were exclusions for each type of appliance and system

Then I realized it. Using a home warranty company and trying to get them to approve our claims would always be an uphill battle. Certain terms and exclusions seemed to be purposely placed in the home warranty contract to protect them from having to pay for any serious work, let alone to replace an appliance or system. 

The way most appliances are made these days, it makes more sense financially to replace them than to fix a broken part. Yet and still, home warranty companies will charge you hundreds per year and $75 for each service call to attempt to fix outdated appliances and systems. 

Now, this is just our personal experience with two home warranty companies. This won’t necessarily be the case for every homeowner. But I realized they’re not for us and we’d be better off creating our own home maintenance plan.

What we do now to save for home repairs and maintenance

Saving for expenses before they come up

Last year, I received a call from our previous home warranty company about renewing our contract, and I politely declined. Instead, I put that $500 I would have spent into a high-yield savings account for home maintenance. I decided to just work harder and save more money instead of trying to outsmart the warranty company and find a loophole where they would cover something for us.

We know we will need things like a new furnace sooner or later, so we might as well start saving for them on our own instead of spending hundreds on a home warranty each year. If a new furnace costs $2,000 to $3,000, we can come up with this money a lot quicker without paying for a warranty. 

Plus, we will have more freedom over who we choose to do the work and what kind of payment plans they offer. 

Taking a DIY approach

Another thing my husband and I are doing is educating ourselves on how to take care of the systems in our home and DIY what we can. We’re adding to our home maintenance and repairs savings fund each month and treating it like a second emergency fund so we can address any unexpected issues with our home that come up.

Being a newer homeowner, I learned the hard and expensive lesson that no one is going to pay for brand new updates to your home for hardly anything in return. Also, as the popular saying goes: If it sounds too good to be true, it is. Trust me, I won’t make that mistake again.

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