Owning a house now may cost more as the government rolls out changes in the tax policy. Given this, would spending only 30 percent, or less, of your income still work?
Homestead Road, a professional house buying company, knows that buying a house and restoring it helps a family. The move, however, comes with a lot of housing costs. If you’re spending the general recommendation of 30 percent of your income on home expenses, you’re doing well. If you’re spending more than that threshold, you may need to reassess your expenses.
Better Financial Protection
The average American homeowner annually spends 1 to 4 percent of their home’s value on maintenance. First-time buyers do not fall within that range, but for those aiming to spend about 2.5 percent on house maintenance for a $400,000 home, that’s equal to $833 monthly.
At a minimum, the 30 percent should be enough to cover the homeowner’s insurance and property taxes. It would give you better financial protection, especially if you can include maintenance within that same percentage.
If you exceed the 30 percent mark, you leave yourself in a risky place with very little room for unplanned expenses in the future.
Mortgage Interest Deduction
A lot of Americans loved the mortgage interest deduction as it helped homeowners save more money before the new tax breaks happened. Although late-night shows have been enjoying poking fun at the new tax policy for favoring the rich, key deductions remain firm for the present tax year at a lower threshold.
From a deduction of $1 million on a home loan interest, you now only have $750,000, which is the cap. Existing mortgages need not worry about this, but if you’re applying for new home loans, you should keep this in mind.
Spending 30 percent of your income is a guide, not a fixed rule. Sometimes, it might not work for certain situations, and other times, it could help you manage costs. Try to assess your home’s expenses and check if you need to make adjustments and in which area. Doing so could strengthen your financial future by ensuring protection for whatever changes come, whether it concerns taxes or life in general.