How much of your income should be rent?

always_sunny

I wouldn't budget for anything over 1/3 of your net income... you need to budget/allocate money for rainy days (and possibly a deposit).

If you and your half spend more than 1/3 of your combined net income in rent then it's a bit of a worry!
Also keep in mind that rent is not the only expense, there is also council tax and bills which in the UK seems to hard to predict.

HappyMJ

I would aim to go no more than 40% of gross income but you've got to make sure you've got enough money to pay the bills and have a reasonable lifestyle. 40% wouldn't work if you were earning minimum wages and had other debts but it could work if you earn a lot of money.

I pay £475/month in rent and the rent is a little more than 40% of our total income but I have savings and other money coming in to cover the shortfall.

jamels2

I spoke to an agent regarding this and was told they usually allow people to rent at 40% their gross income. So if you earn 24000 before tax you would be able to rent up to 800 a month.

Hoploz

I'm just wondering what your long term plan is. Do you plan to always rent? Or will you intend to buy in the future?

Just asking as it would influence what you might choose to do now regarding the amount you spend on rent.

If you plan to rent forever then that's fine. Spend according to your income. If however you want at some time in the future to buy, then you should get busy saving as much as you can, taking advantage of government initiatives such as help-to-buy ISAs where they actually give you money etc. To help save, you would spend as little as possible on rent, living in a small place to minimise outgoings while you save. This is very easy if you are out at work all day and not at home much, and you don't have children, once you are a family it gets far more difficult to save to buy.

It's up to you how you see your future.

always_sunny

jamels2 wrote: »

I spoke to an agent regarding this and was told they usually allow people to rent at 40% their gross income. So if you earn 24000 before tax you would be able to rent up to 800 a month.

I was told EA divides your gross annual salary by 33 to calculate affordability.
This is for their own benefit (and mostly the LL's) to ensure you can afford the maximum, it is not for your best interest if you plan to save some of your income for you know, rainy days... or eventually getting out of renting?

bellaboo86

My mortgage is abut 1/3 of my net pay.
By the time I've paid all my bills and direct debits I've got around £250 left for food and my social life.
When I was looking at houses, I deliberately chose one at the lower end of my budget. I'm really glad I did, it means I can still have a social life and a holiday with careful planning.