How much money should you have left after paying mortgage or rent?

Nashville 2019

Nashville 2019

More Nashville 2019

Do you feel like you have enough money left over after you pay your mortgage or rent to buy all the things you want?

According to Zillow’s Director of Economic Research Skylar Olsen, you shouldn’t spend more than one-third of your total income on housing expenses. But, at the end of the day, why is that so important? 

The rule of thumb, according to experts, is that the smaller your monthly housing burden, the more you can save for retirement, emergency expenses and things to make your life more enjoyable.

HOMEOWNERS

A new report from Zillow shows, after accounting for your mortgage payment, the median household in Nashville with income just under $67,000 has around $4,500 left over after rent. 

Right now, that is $161 more than the national average. Unfortunately, experts say that could change soon. 

“What it means in Nashville is that right now, you’re pretty middle of the pack in terms of affordability, your ability to live a wonderful life comfortably,” Olsen explains. “But one of the things you need to think about when we think about these numbers — and how they might change over time — is that, for mortgage affordability, Nashville home values are still growing at a fairly rapid pace. They’re almost at eight-percent year-over-year. That’s a pretty aggressive appreciation. At the same time, we expect mortgage rates to keep increasing. So in terms of mortgage affordability, now will look better than later.”

Olsen told News 2’s Cherish Lombard, as the job market grows and more people move to the area, Nashville could get closer to “Los Angeles numbers,” but thankfully, we’re not there yet.

“In Nashville, you would expect to spend 27-percent [around a third] of your income on [mortgage or] rent,” Olsen says. “You’re kind of close to pushing that limit but still seems fairly feasible for most families to both afford their rent and pay for all of life’s extras.”

RENTERS

After paying median market rent in Nashville, a median household with an income just under $67,000 should have around $4,000 left over for other expenses. That’s $234 more than the national average.

“Now, that might make it look like mortgages are a better deal, but remember, almost all of that $500 difference could be snapped up by property taxes, homeowners insurance, and other maintenance that’s a little bit more expensive for a homeowner than say a renter,” Olsen explains.

In more expensive cities like LA, your income would be stretched much thinner after paying rent than in Nashville. 

“In LA, that rent affordability number — what share out of your income you would expect to spend on market-rate rents — goes all the way up to 49-percent, which is almost half of your income. You add on top of that, in LA, the price of life’s essentials like childcare, food, transportation, gas — all these things are also more expensive. So in terms of the livelihood, it’s probably easier in Nashville than in LA where the prices of things are pretty prohibitive.”

Nashville is an exciting, ever-growing city. But right now, whether you own a home or are renting, you have a greater chance of saving for the future than the national average. 

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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