Author Topic: how much to allocate to your mortgage?  (Read 1152 times)

treesner

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how much to allocate to your mortgage?
« on: November 22, 2019, 03:46:44 PM »
Is there any general FI guide around determining whats a good amount for a person to spend on a mortgage?

I'm getting close to FI however I rent right now (950 for a bedroom). I'm interested in buying a house because I want more workshop space (for my fi side hustle/passion projects) and some land. However, home mortgages end up being double to triple what I'm paying for rent now so that will likely shift my FI.

I'm in California and moving to the tahoe mountains area. I'm able to find some houses in the 300,000 range but I'd be 'making it work' for me that means smaller garage/workshop, less land, closer to neighbors and less ideal for house hacking. But when I look at places in the 430,000-550,000 they hit way more of what I'm looking for in a place and some spots with big enough garage I could probably just live in the garage and rent the whole house. Should I make it work and go cheap or spend more money but be farther away from FI?

thanks
« Last Edit: December 04, 2019, 11:40:35 AM by treesner »

affordablehousing

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Re: how much to spend on mortgage
« Reply #1 on: November 22, 2019, 04:17:46 PM »
I've asked this question myself before stepping up in home so figured I owe my own .02. We find our home expenses of mortgage, taxes and insurance payment comfortable at 14% of our gross income, or 26% of our take home pay after contributing fully to pension, 401k's, FSA and DCFSA. The federal standard for being "housing burdened" is that your rent is >30% of gross income, so I figure half of that is a more mustachian level of reasonableness compared to the crazy American. As others say, all depends on the timing of your goals but for us, early in our lives, the 14% amount seems a manageable amount of expense to devote to housing and not sacrifice in other areas.

treesner

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Re: how much to spend on mortgage
« Reply #2 on: December 04, 2019, 11:39:43 AM »
I've asked this question myself before stepping up in home so figured I owe my own .02. We find our home expenses of mortgage, taxes and insurance payment comfortable at 14% of our gross income, or 26% of our take home pay after contributing fully to pension, 401k's, FSA and DCFSA. The federal standard for being "housing burdened" is that your rent is >30% of gross income, so I figure half of that is a more mustachian level of reasonableness compared to the crazy American. As others say, all depends on the timing of your goals but for us, early in our lives, the 14% amount seems a manageable amount of expense to devote to housing and not sacrifice in other areas.

thanks for sharing the average percentage and your percentage that helps

Blue Skies

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Re: how much to allocate to your mortgage?
« Reply #3 on: December 04, 2019, 04:19:51 PM »
Our first house payment was ~25% of gross.  We were saving for retirement at that point, but not maxing out the tax advantaged accounts.  Second house we managed to hit 14% of gross and that was very comfortable with increased savings.

Steeze

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Re: how much to allocate to your mortgage?
« Reply #4 on: December 04, 2019, 07:34:46 PM »
If your FI it doesnít really matter what % of income you spend on housing as long as your FI budget covers it. Just make sure you buy something for the long run because getting a mortgage post FIRE will be tough.

For regular working folks 30% gross is a good upper limit. Personally I am more comfortable in the 10%-15% range.

Buying something more expensive and working an extra year or two isnít the end of the world if it allows you to have the lifestyle you want in FIRE. After all what is the point of FI if you arenít living your best life? The idea isnít to live the cheapest possible way. Itís to recognize and afford what is important to you while avoiding spending on things that donít make you happy.

If you are happy with your job and can grind out a couple more years while you build up the stash and the side hustle, I say get the place you want. If you are ready to quit and just want to scrape by with roommates and work on your hustle, I would think twice before locking into something too expensive long term.