Jul 30 2012

Should we renew our home warranty?


When we bought our house last September, the sellers included a home warranty. We chose the company and picked the same one my brother-in-law used. His air-conditioner had problems and the company eventually replaced the entire unit, so that was the basis of my decision.

We’ve had to file two claims since we bought the house, both for our AC. The first claim happened on the day we closed. Oy. The second claim was earlier this summer. We’ve had record heat and drought conditions here in Indiana, and the ACs are just plain working hard. I was satisfied with their customer service and also with the service technicians they contracted.

We have a $100 deductible, per instance. These two claims have saved me about $170. Not a lot of money, and if I had to pay the warranty myself, it wouldn’t be a savings at all.

Our warranty is about to expire, and we are trying to decide whether to renew.

Why pay $429 to renew our warranty, when we could add that to our emergency fund and self-insure?

Well for us, it’s our risk tolerance. Our house is 12 years old. Might even be 13, as I’m not totally certain when the ah…house birthday falls.

All appliances are original. I have no idea how old the washer/dryer are — maybe they were new with the house, or maybe a previous owner brought different units. Things are going to start breaking, since appliances aren’t designed to work forever. We’ll repair them if feasible of course, but we also have to be prepared to replace them.

Replacing one appliance would likely cost more than the price of the warranty + $100 deductible. A dishwasher might be less, but if we needed to replace the stove or fridge it would be more. If we needed to replace the HVAC system, it could set us back a few thousand. Just ask my friend Karen, who now has a brand-new HVAC.

The truth is, it probably would be fine to just bank the $429 this year and self-insure. We could pick our own servicepeople for a repair, and have total freedom in selecting a nicer new appliance if we needed to go that route.

I just don’t want to spend gobs on a new HVAC this year if we can avoid it.

Our home warranty has a cap of $1,000 per kitchen appliance. Maximum for other equipment is $5,000, with a $15,000 maximum liability for all claims. Included: Clothes washer, dryer, oven/range, heating system, plumbing system, garbage disposal, water heater, dishwasher, fridge, electrical system, ceiling fans, door bell chimes, garage door opener, air-conditioner, water softener, range exhaust hood.

Either way, we want to build up a separate savings fund for home repairs. Things like appliances, HVAC, roof, etc. Those things will eventually need repaired/replaced and we’d be better off to have the savings in the bank.

We do have an emergency fund that could cover these repairs, but for me I’d prefer the e-fund to have our backs in the case of a job loss and for insurance deductibles. Additional savings and a home warranty might help bridge that gap.

Not totally sure what we’ll decide to do. We have a few weeks to decide.

How about you? Home warranty worth it, or a rip-off? Would you renew, if you were me, or would you self-insure?

Jul 24 2012

Funding our escrow upfront will save us $277+


We’re in the process of refinancing our house to a 15-year loan at 2.875%.

We’ll need a deposit amount to set up our new escrow account, and the amount I’m told we’ll need is $1,193. That money will be refunded to me from my current lender, supposedly within 30 days.

My lender gave me the option to roll that balance into my new mortgage, or bring a check for that amount.

If I added $1,193 to my loan, amortized for 15 years I’d pay $277 in interest! Also, my monthly payment would increase by $8, or $96 per year.

Good grief. We’ll write a check from our savings account to cover the escrow, and we’ll be refunded hopefully within a month. This move will save us a lot of money for just a brief inconvenience. I mean really — you can have that $1,193 for 30 days if it means I avoid paying on that amount for 15 years.

Our appraisal is coming up. Hopefully our house is worth what we paid, or we might have to come up with some extra cash to make sure we still have 20% equity.

Our closing costs:

  • $251 for appraisal, credit report, flood certification, title insurance
  • $70 local filing fee. Pfft.
  • $325 to re-file for our Mortgage Credit Certificate, which we will pay with glee because the MCC will save us $6,100+ over the 15-year term on our federal taxes
  • $1,193 for escrow account as mentioned above

Hey! I'm Kacie, wife and mother of 3. I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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