What percentage of your NET income should be spent on housing? (pay, taxes)

[Sam82]

I was wondering if there is a recommended percantage of your take home pay that should be spent on housing. I mean all utilities, taxes, and mortgage/rent.

[Submariner]

When I was taking budget counseling courses every year and doing counseling professionally, the standard was 33%

[harry chickpea]

It all depends on your goals and overall income. The more important issue is to have a safety margin and other fall-back investments. If you are sitting on land that will be worth ten times as much in ten years, you might max out the percentage you want to spend. If you have a good chance that you'll move within a couple of years, you want to spend as little as possible.

[Pilgrim21784]

Over the course of my life (I'm 59), I've found that 20% or less is a good percentage. As you get older and assuming kids/college costs, its best to be conservative and not push the envelope between your cash and expenses. A good 30 year fixed rate mortgage is usually the best way to go, IMO.

[colleeng47]

I agree. We're spending almost 21% of our take home pay for mortgage, taxes, insurance, gas, electricity, water and trash pick up. We find that a comfortable amount. BTW, we were approved for twice as much as we ended up getting. Not a good idea IMO.

[acegolfer]

Originally Posted by forest beekeeper

When I was taking budget counseling courses every year and doing counseling professionally, the standard was 33%

I'm glad to see this. In my case, it's little less than 33%.

[Oildog]

Lower the better...Best to target less than 30% so you have money for the rainy day fund.

[Submariner]

Originally Posted by acegolfer

I'm glad to see this. In my case, it's little less than 33%.

Well that was what I was supposed to be advising sailors.

But now that I retired our housing expenses are much less.

We have no mortgage, our taxes run about 2% of our income, utilities are twice that much. So total is about 6% of our income.

[k374]

25% or less is most preferable but in any case not at all greater than 30%.

[Pilgrim21784]

A younger person needs to have some historical perspective; I purchased my current home in 1983 at a mortgage rate of 13.5%. That was a good rate for an individual with good credit at that time. The house is long paid off and mortgage rates are no longer an issue to me. The current environment of extreme government involvement in the economy and massive bailouts with huge deficits will (IMO) create serious inflationary pressure. Mortgage rates will go up. The current mortgage rates are extremely low. The current mortgage rates are a "best buy" in a generation. Few people, my self included, could pay cash for their residence in their early years. Now is a great time to lock in a 30 year fixed rate mortgage. My advice is to keep your housing expenses at or below 20% of your net income, it makes life a lot less hassled. Money hassles are a major cause of personal/family stress. Structuring one's financial affairs to avoid the hassle is just plain common sense. JMO.