Summary
To rent or to buy? For many families, this decision isn’t just about today—it’s also about making the right decisions to provide financial stability and assure generational wealth for tomorrow.
As we start the new year with pent-up demand for housing after several years of an unpredictable housing market, many are questioning whether renting or owning a home makes the most sense.
About 4 million homes are expected to be sold by the end of 2025, an annual increase between 2% and 9% from 2024, according to Redfin.
Not sure if buying a home is still the right move for you (or your family)? Check out our list of pros and cons – it might help clear things up. Homeownership might be the key to unlocking your long-term goals—or you may find that renting offers you the flexibility you need.
Renting
Renting comes with its rewards and challenges. For those who require a more mobile lifestyle or are planning major life changes in the near future, renting could be the better option.
Pros
- Flexibility with Mobility: Renting is ideal for young, single, or career-driven individuals who might relocate for work or personal reasons.
- Less Maintenance Responsibility: Your landlord typically handles major repairs like fixing the roof, plumbing, or appliances.
- Lower Upfront Costs: Renting often requires less cash upfront compared to the down payment and closing costs of buying a home.
Cons
- No Equity-building Opportunities: Monthly rent payments do not contribute to an asset you can own or leverage later.
- Rising Costs: Rent is subject to increases, often without significant notice, making long-term budgeting unpredictable.
- Limited Control: As a renter, you have less freedom to customize your space and are subject to the landlord’s rules.
Homeownership
Those who own a home will tell you it’s an investment—a cornerstone for building generational wealth. For those ready to plant roots and think long-term, homeownership offers opportunities that renting simply can’t match.
Pros
- A Path to Generational Wealth: Paying off your mortgage eliminates one of your largest monthly expenses—allowing you to save more—and turns your home into a key wealth-building asset as it appreciates over time.
- Leverage Equity: Your home equity is the portion of your home you own. You can borrow against it, like using a home equity line of credit (HELOC), to access cash when investing in important life expenses.
- Stable Housing Costs: Unlike renting, where prices can rise year after year, a fixed-rate mortgage keeps your monthly payment consistent. This stability makes long-term financial planning easier.
Cons
- Higher Upfront Costs: Homeownership requires a significant initial investment, including a down payment, closing costs, and potentially higher insurance premiums.
- Ongoing Maintenance Expenses: Unlike renting, you’re responsible for all maintenance and repair costs, from fixing a broken water heater to replacing the roof.
- Less Mobility: Selling a home can take time and involves costs like agent commissions and potential capital gains taxes, making it harder to move on short notice.
Why Homeownership Wins in the Long Run
While renting offers short-term flexibility, homeownership comes out on top as the approach which builds and protects our wealth.
To close the racial wealth gap, we should focus on our assets—maintaining ownership of our properties and acquiring additional income-generating assets that build long-term wealth for future generations.
Start your journey to homeownership with these simple steps:
Action steps
- Have a Family Meeting: Discuss long-term goals and whether homeownership aligns with your family’s vision for the future.
- Calculate Affordability: Use a rent vs. buy calculator to determine monthly costs based on:
- Where you want to live
- The home purchase price
- Your down payment
- The term of your mortgage
- How long you plan to live there
- Your rent
- Explore First-time Homebuyer Programs: Programs like the First-Time Homebuyer Program offer down payment assistance to make homeownership accessible.
- Prepare for a Home Loan: Even if you think you won’t qualify, meet with a lender for pre-qualification. Start with your local community bank or credit union, which often provides personalized guidance. For example, OneUnited Bank is a Black-owned bank and Community Development Financial Institution (CDFI) that specializes in home loans in urban communities in Boston, Los Angeles, and Miami.
And even if you discover some hurdles to get an approval, you can overcome them. For instance, if you need to improve your credit score, there are various action steps that you can take including getting a secured credit card.
Now you just have to get started!
Consult our OneTransaction guide to learn more about closing the racial wealth gap through homeownership. Once you are ready, create your 5 step checklist for homeownership!
Put your wealth and financial wellness first as we enter into 2025! It’s go time!
