Mortgage Payments: How Much is Too Much?

Rule number one – don’t go house poor when buying a new home. Experts say your house payment should be approximately 25% of your take-home pay, while others say you can go as high as 30% – if you have no other outstanding debt and do not plan on going into debt. To find out how much you can afford, many people find using a house payment calculator to estimate the payment on a new mortgage, very helpful.

Homeownership comes with a monthly mortgage payment. Often home buyers are tempted to buy a home priced higher than they can comfortably afford. First-time homebuyers are especially susceptible to this, perhaps forgetting to include the costs of taxes, insurance, and repairs when creating their budgets.

The first step in home budgeting is learning how far your money will go once you’re ready to hit the market. You can do this by researching available properties online. Start by thinking about the must-haves in your homes, such as the number of bedrooms and bathrooms or a sizable yard. Then, look up comparable properties that are currently on the market in your area to get a sense of what you can expect to spend.

Haven’t you mulched in 2 years? Can’t afford to paint your house? That’s a sign that you can’t afford the house in which you live. If you have to go into debt in order to perform the most basic of home maintenance, then you can’t afford your home. The worst part is that neglecting upkeep will only make your house problem worse. Your property value will suffer from your lack of attention. This increases housing liquidity concerns.

You’ve been making mortgage payments for years, but every time you look at your account statement, it seems like the principal balance barely budges. What gives? It’s normal to pay mostly interest when you first get a loan, but over time your money should increasingly go toward paying off the principal. If you find that you’re not paying down the loan as quickly as you want, it could be because your interest rate is too high or your term is too long (or both.)

Household income can take a decrease for a variety of reasons, like losing a job, choosing to become a stay-at-home parent, or getting a divorce. Any of these situations can make it much harder to pull together that monthly mortgage payment. Try refinancing your home with a longer-term mortgage to reduce monthly household costs. If that isn’t feasible, it may be time to look into buying a more affordable property.

Mortgage Payments