What Percentage of Your Income Goes to Pay Your Rent or Mortgage Payment?

Here’s today’s Question of the Day:

What percentage of your monthly net income goes to pay your monthly rent or mortgage payment?

Be sure to include property taxes, insurance, and PMI. I also would include any home-equity loan payments.

I just ran our numbers and it came to 16%. WOO HOO! My wife and I have been “talking” about moving into a nicer house. I’m not that excited about it. My fear is that we would buy too much house and pay too much and put ourselves in a bind. We did that when we bought this house and I don’t want to ever go through that again.

Now it’s your turn to weigh in.

50 thoughts on “What Percentage of Your Income Goes to Pay Your Rent or Mortgage Payment?”

  1. Heh. I just computed this last night for an entry I’m posting tomorrow. Not counting web income, we’re paying just under 20%. Counting web income (which is a new reality in our world), we’re at just over 16%. Keeping this ratio low goes a *long* way to allowing financial peace-of-mind.

  2. JLP:

    After refinancing in 03, I’m at 35%. Includes a 15 yr note @ 4.725% and a small HELOC under $7K. State personal property tax not included.

  3. With everything included, our housing runs about 37% of our monthly gross income. (Blog income definitely helps keep that number below the menacing 40% mark.) This percentage is probably very low for my area considering the ridiculous price jumps in recent years.

  4. Our PITI is at 18% of our net income, which is pretty low compared to the norms of roughly 1/3 of income going toward housing. Which makes me nervous to think about how our financial picture would look if our percentage were at the norm – we feel stretched as it is, even at our low percentage.

  5. Wow, I feel like I’ve got a great deal. I roughed it, but my Rent is 10%, maybe a little less, of my gross income. I know I’m just throughing it away and not building equity though.

  6. I want to follow up to my previous post… the % of income for a mortgage payment isn’t directly comperable to a rent payment. Keep in mind that the tax deduciton will reduce the amount of taxes I pay.

  7. My income is highly variable and derived from multiple sources (i.e. salary, bonus, rental income, etc.), which makes this calculation very difficult to normalize. But this year, housing costs (mortgage, insurance, taxes) as a percentage of gross before-tax income would be 4.8%. So, as you can see, even if I suffered a 50% drop in income, my housing costs (after rental income) would be no more than 10% of income. Needless to say, in NYC, a place where most people spend upwards of 50% of gross income on housing, this provides considerable financial flexibility.

  8. IMHO … live under your means, but travel plenty 🙂

    My apartment comes to about 20% of my income before taxes. After taxes it comes to around 26%.

    I’m hoping to get into a house soon and building some equity, but it’s hard when you’re single, live alone, and have a $400 student loan bill each month.

  9. 2% Gross
    3% Net
    Own, no mortgage, only have property taxes and insurance. Obviously doesn’t take into account opportunity cost.

  10. All included, about 7.6% of gross. By buying an affordable house when we were not making much, the payments became relatively inconsequential as our incomes increased.

  11. Adding up mortgage, RE taxes, insurance, and condo fees – but subtracting out what I charge my roommate for renting out the second bedroom (and not counting that in gross income) – I’m at:

    13.6%

    (for a nice place near my work and lots of restaurants / public transit; on a graduate student stipend; go cheap midwest cities!)

  12. Gross: 17.4%
    Net: 22.8%

    Includes mortgage, insurance, and property taxes. We do not pay PMI and have only one mortgage.

    Living in Texas = high property taxes to offset the lack of a state income tax. Property taxes alone are 6.2%gross/8.1%net a month.

  13. Ballpark figures, single income homeowner, does not include tax benefits:
    25% gross
    36% net

    Also in Texas. Property tax alone is nearly 10% of gross.

  14. Portland Oregon:

    26% of net income.
    17% of gross income.

    Includes mortgage, HELOC, property tax and HO Insurance on a 400k house.

  15. 0%. I got renters paying for it now ;). I’ll be buying another house in June with my g/f and then we shall see how much of my money goes to my mortgage.

    Jeremie

  16. Our rent is 15.2% of our net income.

    We moved from the other side of the country where that (owned) home was 16.9% of our net income. Now it’s an investment property, but we will look to move back at some point. Hopefully it will be even lower at that time.

  17. For us, it’s about 18% of my salary gross, and about 30% of my net; I have a whole lot of taxes withheld from my paycheck to cover my wife’s self-employed income…

  18. Considering the ridiculous prices in the DC area, somehow I’ve managed to keep my PITI at 24% of my gross income.

    The net % would be grossly inflated because ALL of my investments & savings are on automatic payroll allotment. I’ve arranged it so that my net income forces me to live from paycheck to paycheck.

  19. My income is highly variable because the bulk of my money comes from commission. However, for the past few months, 23.6% of our income goes toward our mortgage, insurance, and property tax. That includes salary and commission. If I only count monthly salary, we pay 78% of our monthly salary. As you can see, it’s very important for us to budget commission checks so that we can live comfortably here in San Francisco.

  20. For Greenwich, CT it’s 29.7% of net. I calculated net without taking into account deductions for health insurance, dependent care, 401K and flex spending. We live in a small house compared to the Jones’ but we can’t afford to upgrade because property values have skyrocketed and income hasn’t kept pace. Ah.. the joys of living close to Wall Street.

  21. 30% net
    21% gross

    I live in the UK, where housing is considered expensive (lots of people on a smallish island) so I think I’m doing pretty well. This includes council tax (tax on living in a property so renters have to pay) and contents insurance (biuldings insurance covered by landlord).

    I’m hoping to buy in the near future, and then I’ll be at 39% net and 28% gross.

  22. around 31-32% of gross, closer to 40% net. one mortgage, no PMI, inclusive of taxes and homeowner’s insurance. Without insurance, it’s probably down 1-2%. I made more when I bought my house, then quit my well-paying job so it’s taking up more of my income though.

  23. I own in Lincoln, NE.
    Debt to Income Ratio for Housing – 7.8% of gross

    It’s best to figure this ratio off gross income, that way tax witholdings, insurance, etc. don’t skew the numbers. It allows the banks to compare apples to apples when approving clients.

    Under conventional mortgage loan guidelines, your total housing expense should not exceed 28% of your gross income. Your housing plus any other debt (student loans, auto loans, credit cards, etc.) should not exceed 36% of your gross income.

    I have both of those ratios calculated at the bottom of my budget so I can always see where I’m at for DTI ratios.

  24. I own my home in Fayetteville, Arkansas. My family of five ( myself, wife, and 3 children) is a single income family. We do OK only because we have zero debt outside our mortgage. I took a +25% (gross) pay cut two years ago to leave a high stress job at a large publicly traded company for a job I enjoy at a state university with loads of benefits. I know several people who dream of doing the same thing but have to much debt to make less money. There are always costs associated with high debt.

    PITI to net income is 21.67%
    PITI to gross income is 14.91%

  25. About 15% of gross in San Diego (bought house in 1999 fortunately). If I was still in my 20’s, I’d think long and hard before deciding to live between San Diego and Seattle on the West Coast or between DC and Boston on the east coast. Sure you make more, but you pay a lot for quality of life. I don’t buy into the idea that home equity is an investment; its a place to live and a lifestyle choice.

  26. Renting as of today: 26% of net
    Soon to be buying: 38-40% of net

    P.S. Not everyone “chooses” where to live–some of us have to go where the job is. Hence home equity is not always just a lifestyle choice. If I had a viable choice I’d go where it’s much, much cheaper to live. (i.e., not Rhode Island)

  27. Mine is 19% of gross
    28% of net

    We make 132,000 per year (two teachers) and our mortgage/insurance/taxes are 2050 per month.

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