How Much Do You Spend On Your Home?
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How much of your income do you spend on your home(s)? What percentage of your net worth is your home? How has the money questions around your home affected your career (could you take any job you wanted, or are you committed to maintaining your current income level?), or your relationships, romantic or otherwise?
More questions — do you feel like the amount you spend on your home makes sense for your lifestyle? Is it a stretch or is it easy? When you've been in the market for a new home, have you been drawn to what you “could” afford, or what is the right size for your household? How much do you feel a pressure to “keep up with the Joneses” when it comes to your home?
{related: not sure what to do first/next in your personal finance journey? here's our money roadmap}
How Much Income You SHOULD Spend On Your Home, MAX
The rule I'd always heard was that you should pay no more than 30% of your gross income towards rent — and looking around the web now, it looks like the general advice is 28% of your gross income towards mortgage, with no more than 36% of your income towards all debts, including mortgage. (This is called the 28/36 rule.)
How Much Does Your Home Comprise Your Net Worth?
According to The Financial Samurai, the average American has 70% of their net worth in their homes — but the author thinks this is too much: “In my opinion, the ideal primary residence value as a percentage of net worth is no more than 30%. This is a percentage to eventually shoot for as a first-time homebuyer. For veteran home buyers, you can use 30% of your net worth as a barometer for your next house purchase.”
Over to you, readers — do you feel like the amount you spend on your home makes sense for your lifestyle? Is it a stretch or is it easy? When you've been in the market for a new home, have you been drawn to what you “could” afford, or what is the right size for your household? How much do you feel a pressure to “keep up with the Joneses” when it comes to your home?
Stock photo via Stencil.
We spend 15% of our current gross HHI on our home. That includes our mortgage payment, taxes, insurance, utilities, and average maintenance costs. Our home currently makes up 35% of our net worth. We are on track to have it paid off completely in the next 5 years.
We have been in this house with very static annual costs for nearly 20 years. When we first purchased this house, our gross HHI was significantly lower so the percentage was more like 35%. We were pre-approved for a much higher amount (something wild like 50% of our gross HHI) and I cannot imagine how stupid a decision it would have been financially had we bought a house that maxed out the amount we were offered. Those were tight years and I would never want to go back to those days. The worry that large unexpected expenses would come along was so stressful, and dealing with them when they did was also stressful. With rent, you are insulated from home maintenance costs so I think your rent as a percentage of your gross HHI can comfortably be a bit higher as long as it fits within your overall budget.
Since they are not paying my expenses, I could not care less about keeping up with the Joneses.
We spend about that, also – 16% or so of our gross on our home. Maybe 18% with utilities and maintenance. We refinanced to a 15-year mortgage in 2021 though so that payment is a bit higher than it needed to be.
Our home is less than 20% of our net worth. We moved from a major market to a much much smaller market so we tried to avoid buying a huge house, but the white trim on the new build got me. (But it was still less than half of what we sold our condo for in the bigger market) I sometimes feel bad about not keeping up with the Joneses but I also hate the pain of moving so we’re staying put until we need to leave.
I CURRENTLY spend less than 20% of my gross income on housing (mortgage, insurance, property taxes and maintenance fund). There have been years when my maintenance costs were a little higher (roof replacement) but my mid-80s house has generally not required very expensive repairs and I stay on top of maintenance issues that might become a bigger problem. The house will be paid for next year right before my 59th birthday. I live in California so my property taxes will not go up considerably although I expect that insurance and maintenance costs will continue to rise with inflation.
When I bought in the late 90s it was much closer to 35% and things were tight for a couple of years, particularly since I had a baby a year later and had daycare costs. My expenses were more than my income for about 18 months. But now I view purchasing my house (and not treating it like a piggy bank with cash-out refinancing) as the best financial decision I ever made. Housing prices in Southern California have gone through the roof and having it paid off before I retire means I can have housing security and avoid regular increases in housing costs when the rent goes up which is the problem my renting friends have had as they retired.
Myy house is way more than 30% of my net worth and I question the advice to aim at that percentage. Obviously my net worth has increased as I have gotten older and my 401K has increased but I would have to move to a dramatically less expensive place to meet that goal.
When we bought our house our income was $150k and the purchase price was $350k. We had saved a big down payment though and our 30 year mortgage payment was only around $1,200 each month, or right around 10% of our income. We paid it off aggressively in about 5 years. Our property taxes have gone up a lot though and today our home is worth about $700k, property taxes are about $7k and our HHI is $200k. We probably spend $2-3k each year on maintenance, more like $4-5k if you include utilities like cable and internet. Our house is currently about half our net worth but that number will decrease as we save more for retirement.
We spend 6% of our gross on mortgage & taxes & insurance, if that’s the % intended. Maintenance probably bumps that up to 7-8%. We did a one-off huge renovation that was 40% of our gross HHI, paid out of savings, and which based on recent comps in our neighborhood and sqft, was a justifiable investment.
We bought less than half the house we were qualified for because (1) we didn’t want a huge house to furnish and upkeep, (2) we wanted to be able to comfortably afford the house if one of us wasn’t working for whatever reason, and (3) we had a particular fave neighborhood in mind with low turnover, so jumped at the opportunity.
We bought in 2015 and the payments were higher than I would have liked – about 40% of our take-home, and we had daycare payments for 3 more years. We were aggressively saving for retirement and knew we could pause that if we got into a cash crunch, but it’s worked out well. We refinanced to a 2.5% rate and our incomes have grown so that now the payments are less than 20% of our take-home pay. We could pay off our home tomorrow but there’s no reason to with the stock market doing well.
Our house is just under 50% of our net worth, but that’s not something we aimed for. Real estate in our area is nuts and our house has gone up in value more than 50% since we purchased it. It’s the one time I’ve been really lucky with a big purchase — not that it does us any good now, we won’t tap that equity until we retire and move.
13% for mortgage, taxes, and insurance. I do not keep track of other expenses.
I pay about 25% of my gross income in rent for my primary residence and mortgage, insurance, maintenance, and taxes on a vacation home. That feels pretty high to me in my overall budget, likely because the vacation home is objectively frivolous and was purchased in 2021, so fairly new. I had never looked at it as a percentage before and it does make me feel better about the expense. The house is about 50% of my net worth, but thats irrelevant because I dont consider it an investment and much of that is driven by appreciation since the purchase
I think looking at budget is much better than these percentages. For example, if I take my gross salary divided evenly across 12 months, then my mortgage, insurance, taxes, and utilities is 17% of that. However, I also have student loans and a car loan. If I add those monthly payments, against NET income, and since I’m paid biweekly if I look at my typical monthly net income (not counting the 2 months with an “extra” pay date) then it jumps to 47%. That’s a huge different between what it looks like I can afford vs what I can actually afford. And that doesn’t include housing maintenance. Of course I am also gaining equity and my house is one of two major investments (along with my 401k).