Are You Overpaying for Your Rent or Mortgage? Let’s See…

how much should your rent be

Housing takes up a substantial portion of every person’s salary. For most people, it’s hard to know when they have devoted too much money to the rent or mortgage. Have you ever wondered if you’re paying too much for your housing?

Use the second line of this percentage calculator to figure out what percentage of your monthly income is going towards your rent or mortgage. Got the number? Now let’s see how you stack up! (after the jump)

How Much Should You Really be Paying for Your Rent or Mortgage?… 

The golden percentage? According to experts the magic number is 33% (after taxes).  Experts say that if you’re paying this percentage of your income or less you are in good shape.

Percentage of Your Income

When determining if a house or apartment is a good fit for you financially use the 33% rule of thumb to decide if the cost of your housing will exceed your budget limitations. For other people, it makes sense to take a closer look to determine what the right percentage is which could vary depending on what kind of city you live in. New York City’s housing costs are going to, obviously, be far greater than say, Lincoln, Nebraska’s so that should be taken into account if the 33% rule doesn’t seem to be making sense for your situation.

Getting Specific for Homebuyers

If you plan to buy a home, then you need to include much more than your monthly mortgage payment. Don’t forget that you may have to pay for home insurance, maintenance, landscaping, home owner association fees, and annual property taxes, too. Consider all the costs when you decide how much house you can really afford to buy. Don’t fall into the trap of becoming house poor. Keeping your mortgage payment under 33% of your income might not mean much when you forget to include the added expenses of home ownership so don’t be tempted to take on more house than you can realistically afford. Be conservative and resist the urge to buy big just because you got approved for BIG.

Getting Specific for Renters

If you’re a renter take a serious look at your expenses before deciding how much you can spend on housing. If you know you won’t be able to restrain yourself from spending on entertainment and clothes, then maybe you should look for a place that costs far less than 33 percent of your income. If the rent barely fits into your budget and you’re unwilling to change your lifestyle aim for a less expensive place even if it means you have to forgo some luxuries like air conditioning or a dishwasher. Do your best to be honest with yourself and avoid being overly optimistic if your past behaviors have indicated that you have a hard time controlling your spending when it comes to impulses, entertainment, and/or clothing.

Additional Considerations

  • Ask people who live in the same area as you what they are paying for their rent or mortgage and/or use Rentometer to see how your rent compares to other properties in your area.
  • What is your commute like? Gas and car maintenance can add-up quick. If you can live close to work or on a public transportation line that is ideal and will greatly reduce your monthly costs.
  • Talking with an apartment broker may be a good idea. They may have helpful insights into the apartment market that you might not.
  • Think about the perks that you get with your rent. Is there a gym membership, free parking, or are utilities and wi-fi included? These perks can help off-set your costs but don’t let yourself get too swayed by these as the perks as the cost is often passed along to the consumer within the cost of the rent.
  • If you find you are paying too much for your rent or mortgage and you have extra room taking on a roommates might be an option for you. Homeowners, be sure to talk to your insurance company before taking on roommates because it could adversely affect your rate.
  • Additionally, if you find you are over-paying on your housing think about: creating extra income, lowering your other costs, negotiating with your landlord for a lower rent (research comparable properties in your area. Remember, it doesn’t hurt to ask!), if you are over-paying for rent decide if your money could be put to better use by purchasing a home.


What’d your percentage end up being (I’m paying 32%)? Are you paying more than 33% of your income for your housing or less? Do you agree that this number is a good gauge to use when looking for housing?

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58 thoughts on “Are You Overpaying for Your Rent or Mortgage? Let’s See…

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  1. Jane

    Hi Anna–

    Here in New Jersey, housing costs are a very painful and scary reality. Many people are paying closer to 50% of their income for rent or mortgage. We are not talking about luxury housing, just basic and habitable.

    Part of simple living here means trying to figure out different ways to live whether sharing w/roommates or multi-generational. More subsidized housing is sorely needed but unlikely.

    I am interested in hearing from people who have creatively dealt with this…


    1. Jane Savers

      There is very little reasonably priced rental housing in my part of Canada. Lots of rooming house situations for low income men but now safe, reasonably priced apartments for women or children.

      Rents are pricey but we are a town full of high unemployment and Mcjobs and we must have the largest per centage of adults who have been forced to move back in with mom and dad than any other part of the country.

  2. Kim

    Thanks for the great post! This is something I have been worrying about. I have recently evaluated my expenses and couldn’t tell if my rent was too high. I live alone and I love it, but I know I could save money if I had roommates. I live in a walkable city and don’t have a car, so I justified my rent by thinking about all of the money I save by not having a car. My rent is about 32% of my income, which is good considering I live in Philadelphia. This gives me peace of mind.

    1. Anna Newell Jones Post author

      25% is solid! p.s. Lexington, Ketucky is surprisingly REALLY gorgeous! I loved it and never expected it to be so nice. Those white horse fences that are all over the city are so beautiful.

  3. Erin

    Like Jane, I live in NJ about 20 minutes outside Manhattan where the cost of living is high! My husband and I bought at house at which when we bought we were paying 36% but with a rise in taxes we are now paying 42%. I can’t complain because our percentage is less than what it was renting.

  4. Q.

    We just bought a house: with insurance, taxes & mortgage, we’re paying 15% of our income per month. It was important to us that we live well within our means. Though we do need to do some significant/rather expensive projects on our house, since the previous owner didn’t do a lot of maintenance.

    We live in Baltimore, where housing is generally reasonably-priced, though you need to be careful about the neighborhood you choose.

  5. starjaynas

    With utilities, my living situation is 31% of my take-home pay. I have a roommate and split the utilities, so I feel like I have a good price going here.

    Also, have a less than a ten-mile commute so yay! Far, far better than the 30-mile commute I had for an unpaid internship while in grad school.

  6. Ana Rocadas

    Interesting. Never thought about it, but my rent percentage of income is 34% but this includes my utilities, so I guess I should be pretty happy. Excellent post, Anna.

  7. Ellie

    I live in Vermont and my rent is 26% of my take-home pay. And my apartment is considered expensive! Before I moved in I was living in a place that was 12%.

  8. Hostel

    I live in NJ too and I have a great rental situation. I have lived in the same place for 6 1/2 years and my rent is low and includes all utilities. In exchange for the low rent, I take care of my landlords’ cats, take out the garbage, recycling, get the mail. I only have to do this when they travel which is often but so worth it! They also have 2 other homes that I have access to when they aren’t using them.

    My advice, spend some time looking and see if you can’t find a place on private property. It took me 5 months but it is well worth it. I spend 27% of my income on rent.

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  10. Ruggles

    28%; was surprised. Thought it would have been higher. But a bit relieved. Especially since we bought in the height of the market.

  11. Budget and the Beach

    I’m living in LA and paying up to 40% for rent (but that also depends on what I bring in as a freelancer each month). That’s high I know, and over the last year have considered getting a roommate or renting a cheaper place, but for one circumstance or another, it hasn’t worked out. I think also because I LOVE where I live and feel safe and comfortable, which at 42 is something I consider a lot more valuable than I used to. Fortunately my utilities are VERY low, so that makes it somewhat tolerable.

    1. Jane


      I know the feeling. At 63, I am not as willing to share nor am I as “casual” about safety and location. Like LA, living in metropolitan NJ makes these decisions very difficult. I need to stay in the general vicinity and so am trying to explore the options.

      It helps that I am not alone in this challenge!


  12. Jenna

    This was a really interesting post. Based on my and my husband’s monthly take home we are paying 25% for our mortgage. I was happy to see that we are well under the 33%. We are planning to move to Los Angeles (about 100 miles from where we currently live) and rent will be much higher than our current mortgage. It was nice to figure out how much we can pay and still be around 33%.

  13. Megan

    My husband and I are living in a cheaper apartment and our rent is only 8.7% of our income now. It was higher but I recently found a new job after being unemployed for a month and my husband got a raise. The savings from living cheap has allowed us to almost finish paying off our credit cards! :)
    I love your blogs btw bc it has inspired me to become debt-free!!!

  14. France's

    Yay! I was dreading this but I am under the 33% and live in Manhattan. That makes me feel better about renewing my lease because I am too lazy to move!

  15. Emily

    Ugh, thank you for addressing what just might be “life’s greatest question” for me right now. I am completely overwhelmed by this idea, but this helped clear my head about it a bit. Thanks!

  16. Gina

    Thank you for this post. We live in Minneapolis and I have been thinking that we are spending WAY too much money on our home. While we are upside down due to the market crashing, we are about 10% under the recommended percentage! Thank you for the information because it does make me feel a little bit better!

    1. Anna Newell Jones Post author

      That’s good to hear Gina. I guess if you’re feeling like you’re paying too much and that it’s making you uncomfortable maybe something else needs to be cut back on. I don’t think the formula is error-proof. Be sure to trust your gut and listen to it, if you think you’re paying too much maybe you are.

  17. Teresa

    Wow! Speaking with my friends that live in Vancouver, BC, Canada, my rent is apparently on the lower end for 1 bedrooms in the downtown area. With utilities, I am paying between 40-45% of my income (I do marketing for an international professional services firm). That being said though, Vancouver has notoriously high housing prices and relatively low salaries. This past month the average price of a detached single family home was $1.15 million or $441,000 for an apartment. :(

  18. Therese

    Our little family lives in Chicago. Spending closer to 50% of income is pretty normal – although NOT ideal. Your zip code (neighborhood) is your fate here so people are willing to pay a lot for certain zip codes. Here are some common budget renting strategies:

    – If you enroll your child(ren) in public school (not recommended), getting a decent apartment in a safe area – plus in boundary for a “good” school is the trifecta of stratospheric rent. You could easily spend one entire after tax income on rent, parking, utilities in an acceptable public school area. Private school can be a way to save money as you can then live in a less in demand neighborhood so your rent is cheaper. As an example many Catholic and Lutheran schools are 3K a year (with discounts for additional children). So you can live in a safe area where just the public school is bad and rent will be $900 – $950 a month plus utilities for a 2 bed (700 square feet). However, if you live in a 700 sq.ft. apartment that is livable, safe, and in boundary for a “good” public school your rent will be closer to $1,500 a month plus utilities and such. It seems counter intuitive at first but if you do the math it saves rent money and gets your child out of the dangerous and run down CPS.

    – Your chance of being a victim of violent crime (severe beatings, rape) is non existent in some zip codes and just a matter of time/inevitable in other zip codes. Try to strike a balance and settle in a zip code/area where property crime (car break ins, phone snatching) is higher but physical violence is very low as a budgeting strategy. Broken bones/head injuries from a beating or getting raped will affect your entire life. However, your life will not be ruined if your cell phone gets snatched out of your hand or you forget to bring your GPS in out of the car and it gets stolen. Don’t buy a fancy new iphone (frugal bonus!) that is worth stealing and take the extra few minutes to empty your car and you can get a larger or cheaper apartment without putting yourself in physical danger.

    – Another common strategy is to use the “dining room” as an additional bedroom turning a place listed as a large one bedroom into a defacto two bedroom. It will probably cost the same as a two bedroom but will give you more options when looking in an area. In the same vein, apartments that have “three season” porches can have insulation added and an electrical outlet (for a heater) installed. Usually paying one time to insulate and drywall (and you can diy the wall work) and one time for an electrician to upgrade your space is less that renting a larger apartment. Then you can use the space as a small bedroom or as a “dining nook” since your dining room is being used as a bedroom. *lol*

    – Finally, In this geographic market (not just Chicago, throughout the Midwest) landlords are generally more than cooperative with getting any permits pulled for electrical work or plumbing work and allowing you to upgrade the unit at your expense. We have ripped up (gross) carpet and found lovely wood floors and as long as we paid for the carpet disposal and floor sanding our landlady gave us the green light. We had a reverse osmosis water filter installed since our municipal water is *ahem* shall we say chlorinated? (Smells like drinking swimming pool water *gag*). Finding a diamond in the rough below market rate rent and putting a little work into it to make it shine can be a budgeting strategy. Make sure you get a long lease so you recoup the cost of the upgrades. Bottom line is often renting a place that needs a little cosmetic work is cheaper than renting THE PERFECT PLACE. If the cost of fixing it up is less than the rent amortized over a year or so and you can get a three – five year lease you get the best of both worlds!

    – Since Chicago has old housing stock most rentals benefit from 13 foot ceilings (so awesome). Loft beds from ikea (always cheap second hand on craigslist) are a great way to be able to reclaim floor space in small (affordable) apartments. We sleep on a lofted bed with my sewing table/sewing machine and a “closet” we built under our bed. Our child sleeps in a lofted twin bed and the toys are organized on shelves underneath. I can sit and sew under our bed and we still have enough space to sit up in our bed. Our child can stand under the lofted twin bed and we have a little “play area” underneath.

    Combine all the above strategies and it ALMOST doesn’t make you want to scream when you are paying 40% – 50% of your income on rent!!!

  19. Wren

    I live in Richmond, Virginia and pay roughly 32% of my net pay (not including child support). I feel comfortable with this amount although I wish it was a lot less so I could put extra money towards paying off my debt.

  20. Kendra

    Just outside of Seattle, I pay 23% on rent, but since it’s so cold here, that gets bumped up to 27% when I factor in the electric bill. Ouch! 37% if I factor in car and gas, as I commute close to 30 miles each way. This has been…eye-opening. Hmm, maybe I can do better…

  21. KC

    This is so interesting — thanks for the insight! Consumer Report suggests that all your debt payment, or what I call “fixed bills” (utilities, car payments, cc payments, mortgage/rent, etc), should be no more than 36% of your gross income. I’d love to hear your thoughts — is there another rule you go by? If mortgage/rent is 33%, then 36% seems tricky! Here’s the article:

    1. Anna Newell Jones Post author

      I hadn’t seen that article; thanks for pointing it out. I would err on the side of being financially conservative. Figure out your bills and if you know it will be cutting it close or if you know that you won’t be able to give up your lunches out habit then plan accordingly.

  22. Nick

    This is a great point to consider… a lot of people simply accept rent and mortgage, and ‘everyday necessity’, and utility payments as ‘what they are’, and don’t really think they have the right to analyze or better their situation must…

    We’ve been lulled into a state of accepting what is financially and grown out of the true negotiation mindset of the old. We certainly all could benefit from negotiating and pushing back more, and we all have the right to do so in more areas than we think!

    1. Anna Newell Jones Post author

      Could not agree more. In Denver where I live people are paying astronomical amounts for rent in the Capitol Hill area and I’m always like, “No! Hunt! Cheap places really are out there!” We found this little $600 1 bedroom and it was awesome for the time we lived there. We were able to save and then move on to better things. If a place doesn’t have all the bells and whistles (and if you don’t need them) then you can definitely find good deals.

      Another thing to think about is bartering. Essentially, trading working on the grounds for a trade or partial trade in rent. By doing the cleaning in the common areas or by being the full-on residential manager it could significantly reduce your rent.

  23. JenW

    I’m curious as to whether your 33% is relating to one income or two? if it’s the latter, then we’re doing about ok. The main difficulty is that our childcare also takes up 1/3 of our joint income (for one child; thankfully the eldest is now in school). Not likely to be able to dig ourselves out of debt until our little sweetheart is also in school.

  24. RC

    I’m paying 33% right now exactly. This is split between my apartment and a commercial garage that I rent for my hobbies, projects, and stuff storage. I can make some money from my garage so I am trying to justify it. Without the garage I’m at 18.5%….

  25. Oak Laurel

    Hi Anna, interesting article. Not sure where the 33% rule of thumb comes from. I have a complication for people who are paying off a mortgage. Is 33% supposed to be the interest expense? What about the principal? If you are considering the principal then you need to consider the term that you pay off the loan over. That is, if you are paying off your loan over 30 years then the % will be lower than if you pay it off over 10 years. Of course if you pay it over 10 years you can be exceed the 33% rule but save yourself thousand if not hundreds of thousands of dollars over the term depending on how big your mortgages is. Also this does not consider if you have a variable rate mortgage….. As you probably noticed I have thought of this a bit. I am a mortgage broker….
    P.S. Love the blog!!


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