From Jeff Dixson’s Interview with KXL’s Chris Brown on Wednesday, August 23rd
You’d be surprised how often I get the question, “how much of our income should be going towards a mortgage?” Deciding how much of your assets you should allocate to different things isn’t always straight forward. That’s why it’s helpful to have guidelines.
Simply put, just because you can “afford something”, doesn’t mean you can “afford something”. Even though you might have the ability to put 50 or 60% of your disposable income toward a big beautiful home, doesn’t mean you should. I recommend people put on the low side 25% and the high side 40%, of their after tax income, towards total home expenses. The key words being “after tax”, and “total home expense”. This means, in that number, you include your home insurance, PMI, property taxes etc.
This is a tricky question right now in the Portland, Oregon/ Vancouver, Washington Metro area housing market because home prices are on fire. Portland area home prices have climbed 8.9% year over year from 2016 and, barring any sort of economic recession, I think we’ll continue to see home prices stay hot. Cheatsheet.com came out with an article a couple days ago that named Oregon as the #3 state in the country where retirees are moving to, and Washington is #6. Plus many Californians are moving up here to stretch their housing dollar further, creating more competition in the housing market.
When you’re budgeting it’s best to stick to a principle based percentage if you can, and simply buy less house. More budgetary flexibility in your housing will allow you to spend money elsewhere, like in your retirement savings!
There’s a lot to consider when it comes to your mortgage and how it affects your overall financial picture. This is another reason why having the right retirement coach, that you can go to with these sorts of questions, is so important.