There is a lot of controversy surrounding the topic of renting vs. buying. You will find many articles on the internet that provide an opinion on one or the other.
This topic should be especially important for African Americans because we are less likely to own our homes than those of other races. According to statistics, Black Americans own less than 50% of the homes that they live in, and that rate has been declining since 2014.
There are pros and cons to both renting and homeownership. However, I believe that homeownership should be the ultimate goal for all Americans, including African Americans.
There are specific instances where renting may be more advantageous than buying, but it is my opinion that owning a home is much better for you most of the time.
The Difference Between Renting and Buying
When you rent a property, whether it is an apartment or a house, you are essentially paying someone else for the right to live in their property.
In many cases, the person you are paying has a mortgage on the property which means you are paying THEIR mortgage.
Renting anything means that you do not own the underlying asset. If you go skating and rent skates, you are paying money to borrow those skates for a limited time.
Renting skates is not a problem if you do not skate often. However, if you go skating regularly, over time you will have paid more to rent the skates than you would to buy your own.
The decision to rent or buy a home is similar to the skating analogy above. We all need a place to live. Housing is rarely temporary. Therefore, when renting a place to live, you are essentially paying to borrow something that would cost you less if you purchased it outright.
A Comparison of Some of the Pros and Cons of Renting and Buying
Owning a home makes you responsible for maintenance
Most people see the cost of maintenance as a con of homeownership. It is true that when you own a home, you are responsible for anything that breaks down. However, in most states, landlords are only responsible for ensuring that your residence is habitable. The landlord must generally make sure that the rental unit has working electrical, heating, cooling, and water and is free from mold or other health risks.
Most landlords are in the business of making a profit, so you will find that they will often do the bare minimum to meet the habitability requirements. As a result, renters often deal with many other issues that landlords won’t bother to fix.
As a homeowner, you have the ability to choose which repairs are a priority to you. While anything that causes water damage should be repaired immediately, you can hold off on more minor repairs as you see fit.
Renting limits your ability to customize your home
Most landlords expect their property to be in the same condition once you move out as it was when they began renting to you. Some long-term renters may want to paint walls or hang pictures to make their space more inviting. However, colorful walls may cost them their security deposit once it’s time to move out.
The appliances, flooring, windows, and cabinetry in rental units are generally of lower quality. Landlords don’t want to invest a ton of money on a home they don’t live in. If something requires replacement, they will generally replace it with the cheapest thing on the market.
As a homeowner, you can shop around for more quality products. Replacing appliances and windows with more energy-efficient products may save you some money on your electrical or heating costs.
Mortgage payments are mostly interest
It is true that when you take out a mortgage, the first 15 years or so are mostly interest payments. Some people consider this a con of owning a home, but I’m afraid I have to disagree with this notion.
When you own your home, you own the asset. Each payment you make reduces the amount you owe on the house. The principal reduction will generally result in equity in your property, because most homes appreciate over time. Even in a depreciating market, your home will always have a positive value. Once your mortgage is paid off, you will have an asset you can sell or pass on to your children.
When renting, you will still pay hundreds or thousands of dollars each month, but you do not reap any benefits. The money you pay each month ends up helping the landlord build equity and pay down their mortgage.
Renting may be cheaper
Renting may sometimes be cheaper than buying a home because homebuying will require a large downpayment. However, some states have downpayment assistance programs that will help ease the costs.
Apartments generally have smaller spaces, so you can usually find an apartment that is cheaper to rent than a home with the same amount of bedrooms.
However, if you need more square footage, you may prefer to rent a house. Renting a house is rarely cheaper than buying a home.
Most homeowners will charge rents a market rates. In times of rising home costs, landlords will also move their rents up.
Apartment complexes specifically are notorious for annual rent hikes.
When you get a fixed-rate mortgage the principal and interest portion of the payment itself will never go up, but your total monthly payment may increase due to property tax increases. In my opinion, this increase is generally equivalent to annual increases in rent.
Which Is Right for You?
Whether to rent or to buy depends on your financial situation. Being a homeowner is very rewarding if you can afford to do so. However, it can be a source of stress if stretch yourself thin to do so.
So much of your monthly payment is going to be dependent on your credit score. So, before you think about buying a home, you should increase your credit score as much as possible.
You should also make sure that you have money saved for those unexpected expenses that will come up.
Also, don’t be afraid to buy a home that isn’t perfect. You can get a nice home at a great discount if it requires some work.
If homeownership doesn’t currently fit into your budget then work on increasing your income and saving money so that it can.
