What Percent Of Your Income Do You Spend On Housing Costs?

by golbguru on May 24, 2007

One of the things that allow us to live within our means is cheap housing ~ courtesy of small university town (it’s growing larger by the hour, but it’s still small compared to some bigger cities around). I was trying to see how our housing expenses compare to other Americans , but couldn’t find useful data for renters (I was looking for average rent as a percentage of income). However, I got some interesting data on homeowners and their housing costs. According to an article on MSNBC:

Nationwide, homeowners spent nearly 21 percent of their incomes on housing costs last year, up from just under 19 percent in 1999.

Here is a comparison between our costs and the average homeowner’s cost as a fraction of income:

housing costs as percentage of gross income

So that looks good for us about now. We have about 89% of our income to spend on other things (like savings and stuff) :)

The term “housings costs” include mortgage payments, taxes, insurance, and utilities. In our case (we live in a small rental apartment), it includes rent and utilities [the article does not mention whether it's *net* income or *gross* income; I have assumed gross household (me + wife) income in my calculations].

In the report, the state with lowest percentage of income spent on housing is West Virginia…and that’s still 15.4%. Whereas, average homeowners in California top the list by spending 25.4% of their income.

What percent of your income do you spend on your housing costs? Do mention whether you rent an apartment or own a home. (assume gross income)

I think it’s obvious that most people who rent will be spending less on housing costs than people who own homes (there will be exceptions, but generally this will be the case).

However, I do have a nagging doubt - when a homeowner makes mortgage payments, he/she has a share in the payment in the form of increasing equity. So, I am not completely convinced that mortgage payments are pure *costs* (although higher mortgage payments do reduce your discretionary income and lower your buying power). This is unlike renting an apartment - the renter does not have any form of share in the rent. I am not sure how this issue can be addressed; any thoughts on this?

Here are some other interesting titbits from the MSNBC article.

  • New Jersey had the highest monthly housing costs for homeowners, at $1,938.
  • West Virginia had the least expensive monthly costs for homeowners, at $797.
  • Hawaii had the highest monthly costs for renters, at $995.
  • North Dakota had the lowest monthly costs for renters, at $479.
  • Mississippi had the least expensive median home value, at $82,700.
  • Among America’s 15 largest cities, San Francisco had the most expensive homes, with a median value of $726,700. Detroit had the least expensive, at $88,300.
  • San Diego had the biggest increase in median home values from 2000 to 2005, going from $249,000 to $567,000.

Man, we are pretty close to North Dakota when it comes to renting costs. :)

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{ 58 comments… read them below or add one }

1 ruthie 05.24.07 at 12:51 pm

Currently 25.75% … but we’re living in San Francisco and one-income.

2 CT 05.24.07 at 1:11 pm

Currently we “have” to pay about 16.3% (PITI+utilities) but we add extra principle every month so what we end up paying is about 21.1% of our gross combined pay. This is in St. Louis, MO.

3 moom 05.24.07 at 1:51 pm

My rent is about 9.5% of my gross salary. Electric and phone are the two utilities. That will add on a fair chunk especially using electric heating in the winter here. Could go as high as 15% all in. Certainly my low rent is one of the ways I manage to save as much as I do. No car is the other one.

4 Lazy Man and Money 05.24.07 at 2:59 pm

I feel for Ruthie. We’re living in SF on two-incomes and we rent so it’s pretty favorable - 11.7%. In Boston when we owned it was closer to 14.2%.

5 Jeremy 05.24.07 at 3:54 pm

With my wife and I combined and using gross income we’re at between 15-17% and we own. I guess it depends too on what types of utilities you include. I included electric and gas, but if you factor in things like cable tv and/or internet, and since we don’t have a land line do we include our cell phones… etc.

Either way it is nice to be below average in some national statistic for once.

6 Terry M. 05.24.07 at 5:23 pm

My rent is 8% of my base monthly gross income, here in Austin, TX. A bit lower than last year, since I got a raise, and the rent where I live went down a little bit.

7 stidmama 05.24.07 at 5:52 pm

With just mortgage, we are paying about 27% of our income, adding in utilities and taxes (propane for heat, cooking and hot water, electric everything else) it’s closer to 40% — income after tax and retirement and other deductions. Pre-tax and deductions, the amount seems a lot more reasonable! Like Ruthie, we are on one income.

We live in an unincorporated area of thurston county, WA

8 Christopher Smith 05.24.07 at 6:28 pm

Golbguru,

You state that “I am not completely convinced that mortgage payments are pure *costs*”

Well you’re definitely right! If you bought a $150k house and put 20% down, then took out a thirty year fixed rate mortgage at, say 6.5 percent then you’d end up with a payment (principal + interest) of around $758. In the first year you’d pay down $1,341 of your balance. That’s not too much, but the $7,761 that you paid in interest is tax deductible. If you’re in the 25% tax bracket then that saves you around $1,940.

And here’s the good part. If the value of your house appreciates that’s your benefit. So if in increases at 5.5 percent - around the historical average - then that’s over $8 grand that goes to your net worth.

Homeownership = low volatility + high leverage = a great investment. Yes there is some risk involved, and now isn’t always the right time to buy…but in the long run you gotta do it.

9 Lem -GL 05.25.07 at 12:45 am

Oh man! Sharon and I just bought a new place. We aim to keep our housing costs at a minimum, especially as a first time owner. I guess those late night dinners at McDonalds have to stop :-)

10 F2O 05.25.07 at 6:16 am

Housing costs = 14.67% monthly gross.
This includes mortgage, ins, prop taxes, and basic utilities (gas, electric, water).

11 HC 05.25.07 at 7:06 am

On my usual (two pay-period) gross: 24%.

If I add on power and gas, it’s about 25%.

Such is life in the big city!

12 Moneymonk 05.25.07 at 10:04 am

11% … way to go Goldguru

We are at 30%, but my mortgage and student loans are the only debt we have.

13 Moneymonk 05.25.07 at 10:07 am

That is 30% take home pay, if you are counting gross it is 20%

14 LateStarters 05.25.07 at 12:30 pm

Golbguru, you’re so lucky to enjoy a rent so low! Counting a graduate stipend of $2k/month, you’re paying about $200 for rent and utility?! lucky you!

When I entered graduate school, I paid about 28% of my gross income for one room in a 2-bedroom university dorm. And when I finally graduated, I was paying 39% of my gross for the same room. A very good strategy to move out PhD students faster!

Right now, with 2 full-time job income, we’re paying about 7% gross including cell phones and utilities, not much better than you. Moreover, we’re looking for some reasonable upgrades in the next few months to have more space. I think 10% is a good number for us.

15 LateStarters 05.25.07 at 12:55 pm

Golbguru, sorry that i forgot to add your wife’s income. Is she a graduate student as well?

I forgot to add that I’m currently renting in a metropolitan area with medium rent level.

16 golbguru 05.25.07 at 1:05 pm

LateStarters…yeah my wife is also a graduate student. Plus, I am including some additional income from other sources than just our student stipends - that raises the income a bit and reduces the ratio even more.

I do agree that having a high housing costs to income ratio is a good motivation to get out of school fast. ;)

17 Super Saver 05.25.07 at 2:45 pm

Ours is about 21%, which includes PITI, utilies but not maintenance (like repairs). My lowest was when I first started working, at about 13%.

18 Caro 05.25.07 at 6:56 pm

Ours is 18% (Greater Seattle area) but we are also only in year 4 of our mortgage. In year one it would have been 33% or so. The beauty of the mortgage is that it will remain static (assuming no Home equity loans or refinancing, etc.) while our incomes continue to grow. This is a sloppy estimate that doesn’t take into account tax savings from mortgage interest or property taxes.

Our plan is not to move, though we recognize it’s possible.

19 agressive saver 05.27.07 at 5:45 am

i just did a rough calc, and we’re at around 20% against gross (in dallas, tx). that’s counting utilities, insurance, and taxes, of course. one thing that hasn’t been mentioned, though, is the cost of maintenance of a home that you own. it can be quite expensive to maintain your home, depending on it’s age!

20 Jared Mehl 05.28.07 at 10:01 am

Currently, 32% of takehome in a 1-br apartment

Due to an impending baby and an upgrade to a 2-br apartment, 40% of my net income will go towards the rent…

We’re located roughly 45 minutes outside of philadelphia…

Expensive area + low income (social worker) = Ouch!

21 Eric 05.28.07 at 10:05 am

17% on one income, but with my wife returning to work full time this year it will drop down to 11%. This is based on gross income and not counting extra principal payments.

22 beth 05.28.07 at 10:58 am

I’m paying about 22% of my gross income on housing - that includes rent, renters’ insurance, electricity, phone, and internet access. Fortunately the rest of my fixed expenses (car and school loans, cell phone, and car insurance) are just another 8.36%, so all in all I have just about 70% of gross to work with.

23 Kathryn 05.28.07 at 1:28 pm

We own our home (2 adults, 2 kids), and pay about 20% of our gross toward mortgage and another 5% for taxes and insurance. Back when I was a single parent, I paid 33% of my gross on rent.

I think the whole housing thing is more complicated than just what % income. My old rent was less than my current mortgage, but I also had half the square footage I do now, plus no yard, garage, etc.

Some people will say that you shouldn’t consider your home an investment, but I disagree vehemently. One sweet thing about owning vs. renting is that your mortgage will not go up. 10 years from now, our income will be higher, our mortgage will not, and as a percent of income it will be in the neighborhood of 12% instead of the current 20%.

In contrast, I saw my rent go up by ~7% a year the 3 years I rented in the DC area–almost twice as fast as my income! 10 more years of that, and housing costs as % of income would have wound up at almost 40%.

Not only that, but when I moved out of that apt. after 3 years of renting, I got a whopping $200 in security deposit. If we moved out of this house today and went back to renting, we’d have a $200,000 dollars to show for our troubles over the last 3 years.

And that doesn’t even get into the income tax advantages.

$200 vs. $200,000. If that’s not an investment, I don’t know what is.

24 junger 05.28.07 at 5:41 pm

We spend about 37% of our monthly income on rent (not including utilities). We live in the Boston market, which isn’t exactly cheap.

But on the bright hand, two years ago, our rent was 55% of our monthly income. Our salaries have gone up, and our rent hasn’t.

25 Tyler 05.29.07 at 5:16 am

I also live in the Boston market (Cambridge)…for one of the most expensive metro areas in the country, I feel like we are doing pretty well spending only about 25% of a single income on rent.

26 NYChick 05.29.07 at 10:45 am

Ok, everybody…Brace yourself. I am currently paying (gasp) almost 41% of my GROSS base salary for rent and utilities. (And I live in a high tax state and city…It all comes to >50% of my take-home pay.) Eek! But a few stipulations:

1. I live in NYC. Sigh.
2. I could sublet one of my bedrooms and lower my cost by more than half, if I ever got into a tight situation. As it is, I prefer to be roomie free and forgo some other luxuries.
3. I have only student loan debt.
4. I max out my 401(k) with salary deductions, and I fund my Roth IRA and pad my savings/investments with my bonuses and commissions (usually another $20K-30K per year, and the 41% figure was if I made $0 in commissions and bonuses).

So, all in all, I’m doing all right. (I just eat A LOT of pasta! hehehe)

27 ben 05.31.07 at 12:22 pm

%48 goes into rent for me! I am a college student residing the garbage state, NJ.

(I meant Garden State)

28 sfordinarygirl 05.31.07 at 10:14 pm

Wow, I was afraid to admit my rent is 40% of my budget. But seeing all the other commenters didn’t make me cringe so much. I live in San Francisco -high rents but I pay below market value $560 a month including utilities to share an apt) in a very nice neighborhood. Rents are going up in the area but my income remains stagnant … sadly.

29 Minimum Wage 06.01.07 at 4:47 am

Nationwide, renters have less than half the median homeowner income, and pay a much higher proportion of their (lower) incomes for housing than do homeowners.

While renting is usually considerably cheaper than owning in the short term, in the long term is becomes considerably more expensive, as rents tend to rise monotonically while the homeowner’s P&I payment remains nominally constant (and declines in real terms) over time with a fixed-rate mortgage.

Here in Oregon, an estimated one in five renters pays at least 50% of their income for rent, not including utilities.

30 Steve Austin 06.12.07 at 1:35 pm

28-29% of gross income (renter, various locations in the Northeast)

In preparing for early retirement, I was wondering if a better metric (than monthly housing costs / monthly gross income) might be annual housing costs / liquid net worth. 4% of net worth is commonly cited as a maximum withdrawal rate in retirement, so if one is spending 1-2% of net worth on housing annually, one is probably doing all right (leaving 2-3% of net worth for other expenses).

31 J2R 06.13.07 at 2:25 pm

@Golbguru

I would be really interested if you could post a poll here.. Actually 2 polls… One for renters and one for owners to see how every one would compare to the rest.

Ah.. I think it would be important to also track whether the person lived in a big city or small city.

Looks like if you’re living in the big city, you would be lucky to spend less than 30% either on rent or mortgage.

32 Barbra 06.14.07 at 8:08 am

For my husband and I its 10.5% in Atlanta. I guess that is good. We rent a POS house, but there is no way we could own a similar place in the same street and pay the mortgage and property tax with that rent we pay. Good deal for us, allows us to reduce our debts and save for the dream house.

33 JP 06.17.07 at 7:42 pm

We live in Albany, NY(High tax) and we pay 18.7% of our Gross income(my wife and I) toward Home(P&I), taxes, and basic utilities. I still feel we pay too much. I recently purchased a home and I feel we paid to much(I do really like the house, and we can now go to one car as the new place in is walking/bus from my wifes work). I only hope we can see at least a 1.8% a year increase in value as that would break even with our previous rental costs. That takes into account the tax savings in owning a home. I think its possible, so while Im not 100% secure, I dont feel too bad.

34 Jimbo 07.20.07 at 9:09 pm

Current rent in Greensboro, NC = 9%
But lease runs out end of month (good riddance…lousy landlord with oft-broken washing machine…cold water only we learned after moving…broken other stuff never gets fixed, and occasional pests which disgust us and make me cringe for my 8 month old). It isn’t even a dive! Family is ready for ownership, where costsare higher but freedoms are greater. Likely to jump to 20% of incomes.

35 Jimbo 07.20.07 at 9:17 pm

The net worth idea is way off. 2% of,say, $250,000 is just $5000. No one gets to spend just that unless it is a heck of a rat-trap one rents. ($420 for rent and utilities?…precious few decent places for that in any good-sized city…and not a house bigger than a breadbox!)

36 Rich Schiffer 08.03.07 at 1:54 pm

You are right on when you say that the mortgage payment is not completely on the expense side of the equation. The Principal portion of your payment does build your equity position in the home. This is like an automatic savings account. You can access that money by a HELOC or wait and realize the gain when you resell.

The average renter would be surprised to learn that if they bought their own home, they could afford to pay about 30% more per month in a mortgage payment than they currently pay in rent, and still break even at the end of the year. This is because of all the tax advantages for homeowners. The interest you pay, the real estate taxes, and many of the household expenses can be tax decuctible, especially if you maintain a home office. (Consult your tax advisor for specific advice, of course)

If you think about it, if owning a home were actually more expensive than renting (net bottom line) then your landlord would be renting, instead of paying a mortgage. Instead, when you rent, you are paying his mortgage, and giving him a profit to boot.

As a rule of thumb, multiply your annual income by 3. That is about the price of home you could likey qualify for in a mortgage. Most people don’t realize this, and they go on throwing money into their landlords pockets long after they could have afforded to buy their own starter home.

37 Steve 08.14.07 at 2:03 pm

We live in the Pittsburgh area. My gross is 52,000 a year. My wife works part time and goes to school She may make about 15,000 a year. Our total is 67,000 a year gross. My lot fee and utilities combined is about 450 a month. (300 Lot/water and 150 Electric for all appliances budget) If you take that and divide it…my ratio is 6.7% That is not including phones, internet, cable or anything…… With all those monthly bills added, my ratio is still a low 9.6%

I’ll be honest with ya……Mobile Homes are the way to go :)

38 Rich Schiffer 08.14.07 at 3:12 pm

Steve, you have discovered half of the key to a successful retirement. Reducing your expenses with a mobile home is great, but you need to remember that for most people, their “nest egg” is the appreciation of their home value. Mobile homes tend to depreciate in value, not appreciate. If your current costs are as low as you say, you should be able to offset this by aggressively saving close to 20% of your monthly income, to ensure you will have a comfortable retirement. Consult a financial planner for expert advice, of course.

39 Steve 08.26.07 at 6:00 pm

Rich,

That current percentage is just that, current. The wife and I are looking at homes but are unsure of what we should shoot for as far as housing costs. We understand depreciation is a factor and have basically only stayed here to be able to save for a larger home. We are still a very young couple… I am 25 My wife is 23. Mobile homes have allowed me to aggressivly save almost 2,000 per month when we are only bringin in 3800 total. About 55%. Thankfully, we have no car payments, or cable bills (my wife works for the company)…. I’d Say that AFTER school loans are paid, which is minimal, We have about 3800 a month in NET income. Now we do plan to have a few children, and sooner or later we will have a car payment again….. What would you recommend as a good median house price to shoot for that would allow us to live comfortably? I do not want to blow my entire savings on a down payment, but lets say I will have about 30,000 for a down payment…..and lets say a 6.75 mortgage rate to be fair.

40 Rich Schiffer 08.27.07 at 11:33 am

Steve,

I don’t know what area you are looking in, so telling you a “median” home price to look for would be like talking out my you know what.

Without knowing your specific situation or specific region, I cant give you meaningful specific advice. But I can say that generally, if you multiply your annual income by 3, that will give you a good rough number to go by. (If you make $40K a year, a $120K home shouldn’t break your bank. If you make $100K, then a $300K home would be in the right range to look at.) With $30K to put down, you are well ahead of the game. Most people today are looking to purchase a home with much less of a nest eg to start with. Kudos to you.

41 Steve 08.27.07 at 7:59 pm

Rich,

Thanks so much for your advice. Last couple of things that have crossed my mind. If between my wife and I, we make 60,000 GROSS a year, which we do, does that rule of 3 still applies? 60k gross = 180k house? I just wanna make sure we arent talking NET because Uncle Sam takes his fair share.

Also, is the rule of 3 contingent on a 20% down payment?

Ex. House we are looking at is 180,000$

Wife and My GROSS Income = 60,000/yr. x3 = 180,000

20% Down is $30,000

If I were to put 40,000 down, would it be the same mortgage payment, roughly if I bought a 190,000 house? Either way you look at it, it is still $150,000 Loan.

I am in the Pittsburgh market, and you can get a whole lot of house for your $ here. I am trying to get into a home within the next year to 18 months…. Hopefully mortgage rates dont jump. All signs are pointing to them not….plus the housing market is stagnant and prices are pretty low here.

The house we are interested in is a 4 BR 2 Bath House 2400 SQ feet.

Family Room, Game Room and Living room with Central Air and many upgrades is selling for about 140,000 in the town we are looking at purchasing. Which is a good neighborhood.

With our income, would you say this is a safe purchase?

42 golbguru 08.27.07 at 8:21 pm

Rich: “..but you need to remember that for most people, their “nest egg” is the appreciation of their home value.” - doesn’t that sound a bit of a risky proposition? To me real estate is not really “liquid” enough to help you as a nest egg.

I keep reading material on how the housing market slumps … and stays that way for a long time to come at times. Sounds a bit shaky for a nest egg.

Apart from the joy of owning a home (and other psychological/social perceptions of the benefits), one part of my brain says that Steve might be in a better position to use the savings due to the mobile home and invest it in the stock market - instead of jumping for a house. Of course, again, it’s just a personal opinion (and also a reflection on my level of risk aversion).

Steve: 55% savings is awesome - compared to the average American. Keep it up.

Your mortgage payment will reduce with increasing down payment - because you will be effectively borrowing less money (I am not very sure, but sometimes, higher down payment can also be helpful in negotiating your interest rate - so look in to that).

Use this calculator to figure out your monthly payments.

As for “safe” purchase, I have no idea how to address that. Probably, Rich may be able to shine some light on that.

43 Rich Schiffer 08.28.07 at 6:38 am

Steve: Yes, as a rule of thumb, the annual gross times 3 give a range that you would likely qualify for a mortgage. “Likely” is the operative phrase. There are so many other variables (credit score, debt to income ratio, prior bankruptcy, etc,) that come into play, that you really need to talk to someone in the mortgage business to get specific advice about that.
You are also correct that your payment is based on the loan amount, not the purchase price of the house.
As far as “safe” goes: That word has too many interpretations to really answer your question without first asking what you mean by “safe?”

golbguru raised an interesting point. I didn’t say that most people “should” have their nest egg in their home. I said that most people do. Over the past 35 years, housing value appreciation has averaged out at about a 6.5% rate per year. While there is volatility, just as in the stock market, there is security as well. In the stock market, you have no “safety net.” You may wake up one morning and your Enron stock in your retirement account is now worthless. That really won’t happen in your home value. Even if your home should be destroyed by fire, your insurance policy will pay to rebuild, so you are never at total loss. Long-term investing is “safer” than short-term, no matter where you look, in my opinion.

The best advice I can give you now is to talk to a Realtor in you local market. If the Pittsburgh market is anything like the Philadelphia market, prices are stabilizing, and begining to climb again in places. This may be the best time to buy, under the circumstances. At the rate you appear to be saving, however, in 4 years time, you may be able to buy a home with cash, and have no mortgage payment to worry about at all, especially if the money you are saving is also invested wisely and earning interest. Good luck to you.

44 Cameron 09.27.07 at 4:28 am

Nice poll you have here. I like seeing how this varies person to person and location to location. My wife and I are paying about 9.5% to rent in the Dayton, OH area. It’s a pretty nice apartment too, although our combined incomes are probably a little higher than average so take that percentage with a grain of salt. Our rent is $735, electric + water is $120.

We’re planning to move into a house soon and expect our total dollar expense to rise to around $1650/month. Currently we’re saving the $800 difference for the down payment, which ensures we have the down payment when needed, and the extra $800/month when needed. I suppose then it’ll be around 18.5% by today’s income.

45 Robert 10.27.07 at 12:13 pm

Total percent of gross income for all housing costs presently is 4%. Gross income is not that high, but the mortgage is paid off, I built the house, it is every energy efficient. It is 100% electric, but a wood/coal stove as extra heat. It would be less, but my property taxes doubled this year.

46 George 11.01.07 at 8:20 am

I’m late to the party!

30% of gross income goes into a house payment for us in the Portland, Oregon area. However, the property value has increased 10% above the home payment (P&I, insurance, & taxes) each year since buying this home in 2004.

Other items to note about our high ratio: mortgage is 15-yr and interest rate is

47 Steve 11.14.07 at 4:04 pm

I recently just switched Jobs….. I currently Make 53,000$ a year. My Take Home is Rougly 3300/mo AFTER taxes and INSURANCE.

I am looking to Purchase a 65,000$ home in my area. I will DEINATYLY be able to afford this I would think. It is me, my wife (doesnt work) and a baby.

Do you think without her working and on just my income, we would be ok?

Property yTaxes are only 2,000$ a year.

48 lisa 12.30.07 at 10:31 pm

Hi! We live in Ohio, about 25 miles from Columbus .Our bring home for the year was$20,080 total. Our family consists of husband, wife and teenager.Our bring home is $653 every 2 weeks . Our rent is $375 for a 2 bedroom upper half of house about 600 sq. feet.Our water/sewer runs between $22-55(average $45), trash, $16, electric $93 budget and this is with hardly any heat on. I mean sometimes the bedroom got down to 46 degrees last year , but with down comforter , it wasn’t bad. So our rent and basic utilities come to approx. 31.5% of our gross wages.The percent of our net wages is 36.8%.There are lots of things thatpeople aren’t considering when they say it is cheaper to own than rent. Here are a few of them 1)property taxes-they are going up almost every year-most houses here the property taxes are more than our yearly rent, 2)there are no tax advantages to someone who is already at the level where we get everything back anyhow 3) where do you get the money for repairs as houses need upkeep . These are just some things to think about . I’ll gladly listen to your reply. lisa

49 guez 01.25.08 at 9:14 pm

Lisa,

Renters pay their landlord’s property tax in the form of rent.

50 Adam Chamness 01.29.08 at 6:34 pm

I’m a single guy in a small, backwater town in Alabama. I rent a 3/2 duplex because there are no smaller apartments that are in good condition or decent neighborhoods. Rent + utils is 39% of monthly income. Insane!

Glad I found this post though. It’s nice to see confirmation that I’m paying way above normal.

51 Hi 03.05.08 at 7:57 pm

I Live on a boat in a nice marina… i make 60k and pay 321 dollars a month in slip fees, about 120 on a hot month in electric. no taxes, free water, free trash, free everything else. maintenance runs about 100 or so.

The boat is paid for (it cost 24k bucks) so basically i dont get rained on for about 10% of my gross.

52 Jay and Shari 03.23.08 at 7:57 pm

My wife and I are newlyweds both working and RENT FREE, but we are making major sacrifices by living with her parents. We are currently looking for a condo or house in NJ. We weren’t sure how much to spend a month on a mortgage payment so that is how we ended up on this site. Thanks to everyone here we now know about how much to spend. I think 30% of our pretax income is a good number to start with. That 30% should include insurance, taxes, mortgage payment, and utilities. This is not just a place to live but an investment, and a few people made a good point…the mortgage will not go up (unlike rent!) but our income will. Thanks again,
Jay and Shari

53 Sparky 04.03.08 at 12:09 pm

I think the important thing to remember here is that it’s a percentage of your INCOME. You don’t know if these people are making $2K or $10K a month, so these percentages really AREN’t valid comparables!!

54 Nate 04.04.08 at 3:10 pm

Sparky, but then on the other hand people in general tend to adjust accordingly if their income rises or falls.

Anyways I live in Seoul and less than 12.5% of my monthly income goes to rent. I’d be looking to move for sure except the deposit for renting is like 10x the monthly rent or higher here…

55 Tim Singleton 06.10.08 at 8:54 am

On the issue of whether a mortgage payment is pure cost, probably not.

On the issue of is a house an asset? I subscribe to the Rich Dad mindset that says unless it is producing usable income, it is a liability. A banker will tell you that the home is major asset of most Americans. It is the bank’s asset until you pay it off and is only a source of income for them, not you, until you own it free and clear and even then, it is encumbered by upkeep and taxes.

56 Tim Singleton 06.10.08 at 8:57 am

oh, and I pay 28.4% of income in Birmingham, Alabama for housing and utilities.

57 Julie 12.06.08 at 8:48 pm

We pay 14 % of gross income for two persons in Phoenix, AZ.

That includes the mortgage, prop taxes, and utilities (including cell phones for two). However we plan to move back to California and expect to be paying 30% (hopefully not more).

58 Nunna 12.05.09 at 11:05 pm

I’m in a university town as well in Ontario, Canada, and I currently spend 23% (or $450/month) on rent for a bedroom and a sitting room, which is incredibly cheap for this area; my landlord is also my friend. Even for one room in a shared student house, rent would be at least $475, so I’m practically stealing a home. Said landlord/friend is currently freaking out about the high cost of owning a home - heart palpitations, etc. - as his current rental income does not even cover property taxes and utilities, let alone mortgage payments, or the costly renovations required to get more renters. I kind of feel bad for him.

You’d be hard pressed to find a bachelor’s for under $650 unless you went to live on the other end of town in a neighbourhood full of sketchbag thieves and addicts, chavs in a constant state of domestic dispute, and drug dealers, which is where one of my friends rents the cheapest bachelor’s ever; he just got a notice from the government that his rent will be reduced because of the steadily-lowering property value, if that tells you anything. The stairwells are decorated with spray-painted gang tags, the pervasive hallway odour is curry and cigarettes with a dash of musty carpeting, and the CCTV cameras have been taken. We once had to file a police report after a woman spent half an hour screaming bloody murder down the hall, and police wouldn’t even meet us at the building in case anyone saw us talking to them. But, I digress.

As far as I’m aware, housing on the East coast is cheap, it gets more expensive the further West you go, then suddenly drops off again at the prairies, and again steadily rises to ridiculous heights in British Columbia, particularly Vancouver. I don’t know what the equivalent payscale or rent cost would be in comparison to many American locales, so it’s hard to tell if I’m in better or worse shape than you lot :P This has been otherwise enlightening.

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