Owning a house has a rather long “to-do list” in order to enable it to run smoothly. A home warranty, mortgage, and home insurance are essentials in keeping your home habitable. Getting these three takes a lot of consideration and time to decide. Here is some important information to consider about all these.
Home Warranty Overview
It is a residential service contract. This covers the cost of the household’s maintenance system and appliances for a certain period of time. Having a home warranty is highly recommended especially to those homeowners who're about to buy a house that’s not brand new and already 10 years old or more. We can’t guarantee that the previous owners were able to properly maintain the components of the house; in that case, purchasing a warranty can save you a lot in the future if anything happens
Here are things to consider before getting the three:
A home warranty can be pretty affordable. It costs from $300 to $600 per year. The amount may vary depending on the area where you live, the size of your house, and your plan. The usual flat rate is around $70 per visit. Though purchasing a home warranty can be quite inexpensive; you consider if you really need it in the first place. Here are a few reasons why:
- If your house is more than ten years old, then you might need a home warranty. Here’s why not all states but most require the builders to warranty a new home’s structural system for a decade. It covers the house’s electrical system, central air-conditioning, plumbing, and windows. This is to ensure that the builders will make high-quality houses.
- Know when was the last time your house’s systems were checked and updated. If your house’s fixtures, electronics, and appliances have just been checked then you might not need a home warranty for a while.
- You must be aware that a home warranty can only remain in effect if you also do your part. Meaning, if you don’t remove the sediment and dirt from your water heater, clean range, and fridge, making sure that there is no clog in your drains, and change your HVAC air filters regularly. Then your warranty provider will not be responsible for the costs of replacement and repair. But as long as you are diligent in doing the upkeep of your house’s system; then there will be no problem.
- Examine your appliances. Are they too old and already past their manufacturer’s warranty? If yes, then you better have a home warranty to back you up in case one of them wears off. Remember, the manufacturer’s warranty usually lasted only for a year.
- Home warranty providers may or may not deny coverage depending on certain factors. Pre-existing damage even before you avail the warranty can be grounds for the warranty provider to deny your claim so just be honest from the start. Since an inspector will check everything before you will get approved; you might as well tell them all the things that might affect your warranty in the future.
- Make sure to check everything before you purchase a house. Is everything properly installed and maintained? Knowing these are all important. Once an inspector checks the house and its components; they will know if your house will pass the qualifications. They may not cover poorly maintained houses, so you must be vigilant in checking your house beforehand.
A mortgage is a loan for you to buy a property. You need to pay monthly; it usually runs to 30 years. But some terms can be longer or shorter depending on your agreement. In most cases, you must deposit at least 5% of the property’s value and a mortgage will help you borrow the remaining amount from a lender. You will then have an agreement for how long you need to pay your debt. If in any case that you were not able to pay your mortgage at all; the lender can repossess your house and sell it.
- Seek for advice. It’s better to have professional advice about your mortgage application. You can have a mortgage broker or Independent Financial Adviser (IFA) It is best to have professional help unless you have good financial skills particularly about mortgages. If that is the case you might not need to seek professional help.
- Keep a good credit rating and avoid tax and bank debts. These are very important matters to consider. Lenders make a background check, especially about your financial history and status. They need to see proof of your income as an affirmation that you are able to pay a loan. Also, they will look for any debts if you have one. Being said, before you even think of getting a mortgage make sure that your records are pleasing and clean. By that, you will have a better chance to get approved.
- How long do you plan to pay your mortgage? This is one of the first decisions that you need to figure out before you get a mortgage. The 30-year mortgage is the most common loan term because it fits the needs of the average income earners. About 90% of Americans chose this. But if you can, you can also choose 10-years or 15-years terms.
- Evaluate your means and needs. By this, you can have a quick grasp of how much you can pay and for how long. This is essential because this will determine how much the interest will be. Remember, the longer the term the higher the interest.
- Before you sign anything make sure that you fully understand these four: principal, interest, taxes, and insurance. These are the most important components of your mortgage; so be meticulous about it and ask every detail.
Home Warranty and Home Insurance: The Difference
Some may find these two confusing. But the simplest way to differentiate the two is: Home warranty is responsible for the upkeep of the household system like the heating, ventilation and air conditioning system and electrical wiring that can wear out after some period of time. While Home Insurance covers the damage or loss of the house due to a qualified peril like fire.
Now that you already know the difference; here are the things to keep in mind before getting a Home Insurance:
- Determine how much you need to insure your house for. Knowing the right amount to pay for your insurance is important. Of course, additional bills are not something to take for granted. The sum-insured must cover all the costs needed for you to rebuild your house the same as before. Try to make a calculation yourself to have an idea of how much it would be.
- Insured the things that matter. Many homeowners think that the way to save money is having the most standard policy possible. That thinking is the reason why many are underinsured. You may think that you don’t have a lot of stuff in your house and you don’t need certain coverage. But the little things when piled up can also cost a fortune. If you have jewelry or furs, you might as well talk to your insurance agent about it to make sure they are properly insured.
- Make a list. Do this before you buy a policy. List all the things that can contribute to the amount of your house and personal belongings. Your couches, bed, television, closets, and dining set. Plus your clothes, shoes, bags, utensils, and other appliances. List even the little stuff. Make sure to do this before you talk to your insurance agent. So that once you meet up you have already an idea of what you want to cover and you can also ask questions about it.
- Ask what is covered and not covered. Moreover, once you already know what is covered; ask until how much is the limit. For example, your jewelry is covered if it got damaged by a fire which is a qualified peril. But if your jewelry is stolen, that will be a different story. There is just a certain limit of the amount that can cover theft. It’s because jewelry can easily be taken. Its vulnerability is the reason why it should have a separate policy. This is also a good question that you can ask your insurance agent before you purchase insurance.
- If your house has special features like a swimming pool, gazebo, and garages; you should ask your agent thoroughly about their coverage regarding those features. Not all insurance companies have the same coverage so they might as well be meticulous in asking questions.
- If you are living in a disaster prone area make sure you are properly covered. Houses that are prone to natural calamities like wildfires, tornadoes, and hailstorms; often pay a higher amount of home insurance. Discuss the coverage thoroughly to your insurance agent. These natural disasters have the tendency to damage a house to the ground. And being underinsured can be the second worst thing that can happen after a disaster.