The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: freeazabird on July 04, 2014, 10:10:58 PM
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What percentage of your monthly after tax income do you spend on your mortgage?
What's the max you would feel comfortable spending on your mortgage in relation to your after tax income?
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I spend about 16% right now. I'm early in my career and still getting raises every year, so it will go down. I didn't really use a percentage as a criteria for buying a house. I looked at owning vs. renting in places I thought I would be comfortable in. If I made twice as much money I'd probably still live in the same house.
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Half of the lowest earning spouse's income, if both are working. Probably only 25-30% if only were working.
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13%. We too have always lived within the lowest wage earner's ability to pay the basic living expenses. Finally after 24 years, one income producer retired to build our rental (read passive income) "business". We could do that in large part because we kept our primary residence debt, low, low, low. It also helps that we had no other debt:) It felt at times like we were limiting ourselves as family and friends upgraded their homes. In the end we were able to utilize our DIY skills to fully remodel our residence and now its AWESOME, for that same low payment. We are on a 30 year mortgage, very low interest and will not be paying it off early, unless we sell it to downsize further, we might could squeeze ourselves into a multi family for the lower interest rate that primary residence mortgage provides.
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Not sure about the question. When I had a mortgage, I spent a lot more on it than the documentation said I needed to. I certainly would not sign up to spend that much on my mortgage. It also depends upon whether I had an offset account as part of the mortgage.
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If we play our cards right, it should be right around 3% this time next year (not including property taxes/insurance/etc). And we're not super high income.
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Wow, 3% that's excellent!
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Like any purchase, you should weigh the amount of utility/happiness vs. the cost. You can easily live in a cardboard box, or a van down by the river, and drop your housing cost to basically zero, but it's not going to make most people happy. You can pay way more for a house close to work/play/stores but have more free time and spend less on commuting... etc. So IMO it makes very little sense to just divide your income/mortgage payment and see if you're over or under some arbitrary percentage.
-W
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Wow, 3% that's excellent!
That'll be with us back in the little 500 square foot house that we purchased in 2012. It should turn out to be quite the purchase.
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Waltworks, well put! What matters is your total spending.
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After tax ratios are hard to calculate because we have so many deductions and diversions from our paycheck. Total payments including taxes and insurance are 15% of our gross income, but more like 28% of our monthly take-home from paychecks.
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We spend 25% of our after tax income.
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4.6% to the mortgage. 4.3% to taxes (I'll take the highish Texas real estate taxes any day in trade for NO state income tax). Total 8.9% of gross income to the house -majority of our costs are offset by renting 3 of the 4 bedrooms to graduate students. We put a large (55%) down payment to ensure we would have our offer accepted in the nutzo Austin real estate market.
By sharing our home for rent we have very little ongoing out of pocket outlay for housing. If children come on the scene this could change.
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10% of income spent on mortgage.
Like said you could spend 15% on mortgage but have a savings rate that is less than 10%.
Overall spending is the main concern