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The point being raised is a good one. It's folly to ignore the on-going costs of taxes, insurance, maintenance, and HOA fees when calculating the affordability of a property. They can vary dramatically even between houses with the same market value. Generally, though, a good rule of thumb is 1% of the home's value per year for on-going maintenance.
Last edited by randomparent; 09-08-2016 at 12:30 PM..
The point being raised is a good one. It's folly to ignore the on-going costs of taxes, insurance, maintenance, and HOA fees when calculating the affordability of a property. They can vary dramatically even between houses with the same market value. Generally, though, a good rule of thumb is 1% of the home's value per year for on-going maintenance.
Bingo. There's a reason why everyone in the financial world refers to PITI payments, and not just P payments.
Right now our rent is about 17% of our Net, which, in our area is pretty good.
When we buy in a couple of years I'd like to stay around 30-35%. That's including PITI. I'm assuming no PMI, no HOA and around 5% interest (not today's current rates).
Bingo. There's a reason why everyone in the financial world refers to PITI payments, and not just P payments.
Actually they refer to PITI simply because lenders commonly escrow the taxes and insurance, but not maintenance or repairs or HOA. Otherwise it would be PITIRM-HOA or something like that.
PITI on my first house was a little over 20% of gross income and that was not too painful, although I was single at the time so no kids' expenses, and there was no HOA.
Today, on a different (bigger) house our recurring costs are about 5% of gross income, again not including maintenace.
I use 2% of the home value, annually, as a long-term average for maintenance and replacements. Obviously it is quite variable. Some years it's less than 1%, but when replacing a big-ticket item like HVAC or roof it can be a few percent.
Our house payment and homeowners insurance are just over 10 percent of our monthly before-tax income. Honestly, this is what I feel most comfortable with. We are going to have our house paid off in less than three years, and I'm not going to be in a hurry to buy another one.
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