re: 30% of gross income for mortgage payment rule

Gotta remember, the people who write these rules (similar to a bank saying you can afford $X amount of house) are working for entities that have a set % of write offs baked into their calculation. They anticipate some % of these loans to fail. Just because the other % doesn't fail doesn't mean they're not 1 struggling or 2 going to fail the next year or the one after etc.

For you as an individual, you should not be anywhere near the mortgage lenders max estimate, as that puts you right up near the edge of failure where if anything goes wrong you could be set back significantly, and even if nothing goes wrong your only investment ends up being your house.

My wife and I are paying just under 20% of our gross into a mortgage, and I'm not super thrilled with that as is. Every 1% less from that 30 or 20 or whatever "magical" % is another % you could be saving or investing into something else.

We spend about 31% of our take home pay on our mortgage, insurance, taxes, and utilities and it feels very high. I could not imagine spending anymore than that and am thankful I do not have to.. Could not imagine 30% of our gross income.

Ours is 13-14% of net income. Closer to 10% of gross.

We bought this house 13 years ago when we made a good bit less money and also had kids in private school. Then we refinanced at 2.3% during Covid. Now we no longer have the private school expense, and our household income has gone up a good bit.

We have no plans to move though. We like our neighborhood. We'll be empty nesters pretty soon and the house is a little big for 2 people, but it would cost us more to downsize.

IMO, a home is the most important purchase of your entire life. Whatever amount you dedicate to this mortgage payment needs to be directly proportional to how important home life is for you and your family. If you would rather spend your time traveling, or not at home, then yeah sure try not to spend too much on it.

I live on 10 acres in the woods. We love our little place away from the madness of life. Our home is everything to us, our pride and joy. I would have dedicated up to probably 35-40% of my income to my home if I could go back.

Invest in your life, fellas.

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30% of gross income for mortgage payment rule

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Brought to you by the same people who recommend saving six months of income for an engagement ring.

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So what do yall usually recommend for a housing budget?

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I'd recommend calculating a housing budget:
- start with take home pay (make sure all retirement and savings have been removed to get to this number)
- determine and subtract monthly budget for food, vehicles, travel, clothes, subscriptions, etc.
- determine and subtract how much discretionary spending/cash you want available each month
- What you have left is what you can comfortably put towards mortgage, property taxes, utilities, home repairs, home maintenance, hoa dues and home insurance.

The percentage recommendations just dont make any sense. Everyone has different spending priorities.

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Saving money on home payments is one of the most straightforward tickets to financial security.

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While I don't disagree with your statement, I believe saving money on car payments is more important. At least your home is going up in value.

You may pay a lot of money to hop from house to house every 6 to 8- years between commissions, moving expenses, and getting the place fixed up to suit your needs.

We stayed in our first house a little longer than we preferred, due to our income and a personal desire to live in a substantially better place, not just a modest improvement in housing. The patience paid off. In early 2000, interest rates were between 4 and 5 percent, and knowing we wanted to move in a short time, it made the most sense to throw extra money at the mortgage to earn a better interest rate on our savings (a rate higher than the money market rates we could otherwise get). We probably paid off that house in about 2003.

We then bought 5 acres and planned to build on it, but did not like how the development was shaping up and sold it for a small profit and continued to save money. When we finally saw a great home and pulled the trigger,. The starter home my wife bought on her own before we were married was paid off, and we had a good chunk of money in the bank.

It was a little scary, and interest was in the low 6% range when we took out a mortgage of about 25% of our income. But we bought a house we really love that we can age in (great bones, master on main, good neighborhood) and that worked well. (June of 2006 towards the top of the market)

We financed as a 30 and paid it off in 12 years back in 2018. It was nice not having a mortgage to worry about when the market tanked in the early COVID years, and some jobs were on the chopping block. I kept pushing money into investment accounts even with 60 percent of our company furloughed for 8 months.

From the time we purchased this home until it was paid off, I refinanced about 6 or more times as rates fell, and it was very inexpensive to do so with the bank I used. Each time I did this, I had paid down substantial principal since the previous loan, and as our wages rose and the financed principal dropped, the mortgage-to-income ratio improved.

If we had needed to scale back during the payoff period, having a house payment that was 20 percent or 15 percent of take home would have made that much easier to deal with in case of a job loss or disability, etc.

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The bold part is what I struggle with. I don't know when enough saving is enough

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Enough for what, when and for how long? Answer that in your financial plan to get you a clear answer.

We lived on 80% of our means across 30 yr career and 50-60% last 1/4 of career. Why? To build financial engine that produced lifestyle we wanted when we wanted it (early retirement) for as long as we wanted it (God willing) at Trinity rule (4%). The savings question was answered by the financial objective. For example only.

Financial math was the easy part.