What's your mortgage?

buildboundMay 10, 2006

I hope this does not come across as being nosy because thatÂs not my intent, but in looking at the prices of houses for the past 3-4 years I need to know how people are affording it.

I have been curious as to what people are spending on their mortgage and taxes vs. what they make. Now, I figured a way to do this without talking dollars is maybe a ratio of weekly household take home pay vs. house/tax cost. For example, it takes my wife and I less then a week to cover the mortgage and taxes which I think is pretty comfortable. I also have friends that need over 6k a month for the house and taxes but I don't know how that stretched them, so I know that it is all relative. I know there are all kinds of mortgages to lower the cost, and other expenses, etc. but I want to keep it simple. I am also not using this as a gauge to figure what we or anyone can afford, but more of an insight to whatÂs been going on in the housing market.

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there was a thread on this topic about a month ago. I would do a search for it. Alot of people posted. Also knowing the location of someone's house is also important. Just because some people have to stretch to buy a house in certain areas. They do not have a choice, besides renting.

    Bookmark   May 10, 2006 at 12:11PM
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Here's a link to the thread you want.

Post again if this doesn't do it for you.

Here is a link that might be useful: monthy payment thread

    Bookmark   May 10, 2006 at 11:12PM
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Thanks for the info. I guess I was looking more for the mortgage-to-income ratio that people have.

    Bookmark   May 11, 2006 at 8:13AM
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My monthly mortgage is about 1/8 my monthly take home. We purchased years ago at about 1/5 the amount a lender preapproved us for.

Definitely in my area housing prices have gone up a lot more quickly than incomes. I think it can be difficult for people to get into their first house now. My neighborhood has long been working class--lots of factory workers, clerks, janitors, etc, and then the same people as they retired. But it looks like in the last three years or so there have been more professionals buying here. I'm thinking of a lawyer, a professor, a systems analyst, an museum archivist, even an economist (which amuses me for some reason).

I think it could be very easy to take on too much mortgage. Bigger houses might yield proportionately greater return when you sell in the future. But for my peace of mind, I need more to know that I can afford to stay in my home than that I might someday make some big bucks on it. I am conservative in these things.

    Bookmark   May 11, 2006 at 2:54PM
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As long as you can AFFORD the home,who cares what your mortgage is..Also, don't count on your home being your retirement nest egg...Plan accordingly for retirement, and if you make a couple of bucks, lose a couple of bucks on your home, who cares..

    Bookmark   May 11, 2006 at 3:20PM
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We retired our mortgage several years ago. At that time it was about 45% of one week's "take home". We were "house poor" by choice!

Our property taxes now constitute about 4% of our taxable earnings; meaning we either max out, or nearly do any pre-tax retirement savings option available to us.

    Bookmark   May 11, 2006 at 3:20PM
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Currently my mortgage payment (not including insurance & property taxes, which are NOT escrolled) is 18% of *monthly* take-home pay, not including savings/investment interest. I've added $700 to the payment every month since the beginning. I don't have any car payments, credit card balances, etc.

    Bookmark   May 11, 2006 at 4:53PM
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I suspect that you will get more answers from those who have low ratios. Our current mortgage is, what, about 7%-8% of gross monthly income. After we build, more like 20%. And I'm nervous, understandably.

    Bookmark   May 11, 2006 at 8:02PM
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Demeron is exactly right about who will reply to this thread.

Home prices are so high right now and so many people are too convinced of "what they HAVE TO HAVE" that they raise the monthly "bar" unwittingly.

Need and want... both are important. But you have to put everything you buy into one category or the other. And then you have to cull the "wants" if your mortgage so dictates.

Welcome to reality, get used to it.

(Never owned a new car, a dryer, dishwasher, a chest freezer, a microwave, a cell phone, and we cancelled cable TV last Sep't.)

No great loss, frankly!

    Bookmark   May 11, 2006 at 8:43PM
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wow, chelone,how do you manage,lol..I unfortuenately have all the "necessaties" of modern life.I can't imagine how we lived in the 60-70's without 200 cable channels, cell phones, 3 computers,HDTV,2 new cars in garage,washer/dryer/dishwasher/microwaves, etc..AND i lived in a small 3 br 1 bath cape cod style house with 5 children and my parents...probably 1500sf, now i have a 4500 sf home 5 br,4 baths, more space and stuff i could ever need/use/want,lol

    Bookmark   May 11, 2006 at 8:55PM
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Oh, no, no, no. I consider my dishwasher a NEED. After not having one for most of my adult life, that machine gets me more excited than either husband. Maybe I just need husband #3.

I don't know that only people with low ratios will answer. They didn't on the other thread, but it's kind of like asking someone how much money they make a year. Just a bit too personal. It also matters a great deal if they just have a house payment or additional payments for cars, vacations, etc. All of those general lifestyle questions. Keeping other debt or expenses out of the equation and someone could comfortably spend more on a mortgage.

I also live in a state with extremely low taxes, although you'd never know that by listening to people sqwak. People tend to think Alaska is high, but compared to the East and West coasts, we have more discretionary income with higher salaries than most places.


    Bookmark   May 12, 2006 at 12:46AM
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It's messed up.

Our house payment, at 2000 a month will be 20% of our income.

But, that is before tax income and before property taxes.

With tax and insurance, house payment will be 2600. DH makes 125k a year, but because of taxes, healthcare, 401k he only takes home around 5,500 a month.

That means our house payment will be more than half of our take home income.

Very messed up.

    Bookmark   May 12, 2006 at 3:58AM
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peacensunshine, you raised a good point. Cost of healthcare is taking larger portions of our salaries nowadays. I remeber when employers used to provide it at little or no cost. I have a neighbor paying $600/month for medical insurance. That's more than we pay in property taxes!

    Bookmark   May 12, 2006 at 9:01AM
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My monthly house payment is more the 50% of my "take" home pay. I need 2 paychecks to clear the mortgage and property taxes. I do not escrow the insurance.

    Bookmark   May 12, 2006 at 9:38AM
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When we move into our new house (being built), our mortgage payment will be just under 1/3 of our take home income. This includes taxes and insurance and HOA dues.
Honestly, it makes me a little nervous but I know we'll be fine. I am working on paying off one vehicle so we'll only have one vehicle loan and hopefully will keep it that way. We also have no other debt (other than vehicles) at this point!

    Bookmark   May 12, 2006 at 10:36AM
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When we move in our new house the PITI will be about 25% of our take home pay. And while 25% is considered an affordable percentage, as mentioned you have to consider the whole picture. As our monthly income is not near as high as many who post here, our expenses (including health insurance) means we always have to make choices and can not afford what many consider necessities (cable tv).

    Bookmark   May 12, 2006 at 11:43AM
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Thank You all so much. Everyone has very good input. I know that there will be sacrifices at all levels of percentages but I wanted to get a feel for where the "new norm" has been set. Generally, I would imagine that over a short time it should get easier either by making more money or by being comfortable with the changes in lifestyle you had to make. Many thanks to all of you.

    Bookmark   May 12, 2006 at 2:12PM
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I responded in the other thread....but our mortgage is just under 50% of DHs take home pay. Thankfully we have very little bills outside of our house. No car payments or student loans or childcare. Those things make a huge difference. If I were paying a car payment, child care, and health insurance (ours is covered 100% by DHs employer) we would probably need $2500 more a month??? So if we had to make enough to cover those expenses too we would have a lower % of our (DHs) income going towards housing.

Things like this are all so very relative. It's hard to see someone paying 10% of their income and concerned about the fact that it's going up to 30% when you're paying 50% or more. In the other thread I know at some point many people said 'I would never' or 'I could never'. Well, have you ever had to make that choice? Never say never. It's very expensive to live in certain areas. I'm not whining about the cost of living, but it's just a fact that in CA most young families pay a HUGE portion of their income towards their mortgage. -- Also, 50% of your income when you bring home $6,000 a month is alot different then 50% of your income when you bring home $2,000 a month. We couldn't afford to pay 50% of our income for housing if DH brought home $2,000 a month, but making just over $6,000 a month we do just fine on the 50% I have left for bills and spending outside of the mortgage.

    Bookmark   May 13, 2006 at 12:32AM
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I would like to tell Liketolearn how much I understand!

In other threads I've related how we spent virtually every dime we had to build our home, how "house poor" we were for several years, and what a risk it was.

I will say that the ONLY reason we don't automatically consider our home part of our "assets" is because we don't have children! Our choice to NOT have kids has given us "10 fingers" over most of our friends. We DON'T bear the daily realities of outgrown clothing, piano/ballet lessons, saving for college; nor have we had to forego "extra" hours in our skilled trades because the "kids were sick/on vacation". I now deal with an elderly parent in my home and while it can be a challenge, it's NOT like starting out and having kids!

Still, though... I'm a quinessential yankee... I will squeeze a dollar 'til it hollers. I'd rather "go without" now so that the time I'll be on a more fixed income will be easier. I firmly believe that "livin' lean" is smart, and it doesn't mean you have to "go without".

It's all in how you decide you will look at the way you live.

    Bookmark   May 13, 2006 at 3:36PM
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I was getting a bit depressed the other day when I was reading this thread, and I did the math and figured out that our total housing payment (it's somewhat complicated; it involves mortgage on our residence, a smallish HELOC, and maintenance payments on an investment property that we own free and clear) is about 45% of our take-home pay! HOWEVER, it's only about 25% of our gross; we're putting the max into our retirement funds. Also, the investment property adds a significant amount to our income (I didn't include that in the salary amount) from rent. And like some others here, we have no other debts or obligations (no car payments, no credit card balances, no kids). We have about 12 years left on a 15-year mortgage with a very low interest rate. So it's not so bad, I guess.

    Bookmark   May 13, 2006 at 9:39PM
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Current ratio - 5.5%

After we build new house - 24%

This is based on gross income and payment of P&I.

    Bookmark   May 14, 2006 at 12:31PM
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My mortgage is about 16% of my gross income as a 39-yr old single mom. After prop and income taxes, homeowners insurance, other payroll deductions (mostly health/dental insurance), shorter term savings deposit (smallish), college (big), and retirement saving (14% of gross) the minimum payment is about 35% of my takehome pay. I do pay extra every month to add up to more like a total of 13 payments a year (instead of 12), which will make my payoff happen somewhat earlier. I have no other debt and pay everything off each month. No car loan, pay off the CC's each month, no student loans left.

My retirement saving of 6 digits is my biggest asset for my *very* 5-digit income. The best 2 pices of advice my dad ever gave me were:1. to maximize your pre-tax retirement savings early (I was 24 when I started) and I have diversified into Roth IRA's as well and 2. Pay yourself into savings first each paycheck. If I want to feel really good about my net worth, I calculate the home equity into it, but in reality, I do not ;) I wouldn't want to have to sell my home to get my money out for spending money even in retirement.

I think Americans in general are too greedy about their "forever home" and ideals. Live within your means and don't worry so much about keeping up with the Jones's. My home may not be the biggest, or have the latest appliances or doo-dads, but I can well afford it and keep it clean without hiring help or spending too much of my valuable time on it. I live well with my kids in 1200 sq feet. No wishes for more. I have invested in top-quality finishes and maintenance of my home and its value has skyrocketed in the 8 years I've owned it. Although I somewhat understand the "trading up" attitude--especially for those who live in a very expensive real estate market like SF or NYC--I think that the expectation that everyone will do that is unhealthy. Who REALLY needs 4500 sq feet for 4 people?

    Bookmark   May 14, 2006 at 9:54PM
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First home - 24% of monthly gross income for PITI. No children. Midwest.

    Bookmark   May 15, 2006 at 3:57PM
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Our mortgage is about 11-15% of my DH's income (depending on the year). But we're taking out a home equity loan to do an addition so it'll be about 18-20% now. We hope to pay off the Home Equity Loan in 3-5 years.

    Bookmark   May 15, 2006 at 4:43PM
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We actually don't have a mortgage on our home - I guess because we have the philosophy that edselpdx describes. There are just two of us and we've resisted the temptation to buy bigger, better, more - in spite of being surrounded by friends and neighbors who have very large, expensive homes. We have owned three homes over the last 25 years but have been in the one we have now for about fifteen years. We used the additional $ that would go to our mortgage payment to purchase another piece of real estate which has turned out to be a very good investment.

    Bookmark   May 15, 2006 at 11:46PM
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The building of the Edsel may not have been a wise choice for Ford ...

... but I congratulate you on your operation.

ole joyful

    Bookmark   May 16, 2006 at 11:50PM
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Ours (10 year 4.75% fixed) is 10% of our gross income and a quarter of that goes to the taxes. We choose to pay additional on the principal each month.

In terms of take home, the payment is 17% of our take home (including those high realestate taxes), but with the extra principal, it comes to just under 20% of our take home.

We could buy bigger but have no interest in living large and taking on more debt. Pretty content the way things are.

    Bookmark   May 19, 2006 at 3:36PM
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Here's an interesting article that makes some good points RE: the good old mortgage/gross income (.28) and debt/gross income (.33) ratios maybe not being so sound these days.

In addition to not counting on regular raises and the need to save more for retirement (longer lifespan, fewer pensions), I'd throw in also that modern monthly bills like cable, cell phones, etc. were never in the equation back then. Not to mention rising fuel and health costs.

Some people may be buying too much house for these times. Shameful that the lenders and sellers make it seem perfectly reasonable to shoulder so much debt.

Here is a link that might be useful: how big a house...

    Bookmark   May 22, 2006 at 4:06PM
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I've read all the above, but no one has said much on how you budget/spend your money. Our mtg is about 43% of our bring home pay, we have 2 kids, a truck pymt but overall we seem to be doing real good, I have a good budget that I stick to and its not killing us. I know a couple who's house pymt is 1/2 of what ours is, about the same income but are up to there necks with credit card debt, spending money on nothing, Walmart $200-$300 each time they go, always going out to eat, etc! By the way our hs pymt is $2512, this includes taxes and insurance, Oh and with my budget I'm actually doing a bi-weekly mrtg pymt, our house is brand new, but its going to take off, approx 7yrs!

    Bookmark   May 22, 2006 at 11:44PM
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Thee was an interesting post on budgetting not too long ago.

(No debt)

    Bookmark   May 23, 2006 at 5:08PM
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