“ you know our rule of thumb for total spending on a home is to keep it below 25% of your gross income”
Curious on this, why do you guys make this a percentage of your gross? Shouldn’t this be on take home pay, since you make mortgage payments using after tax dollars? Sure, a counter could be “interest is deductible”, but on a fixed rate mortgage you will eventually reach a point where the majority of the payment goes to principal, at which point you can’t depend on the interest deduction.
Everyone knows what their gross income is, but not everyone knows what they make after taxes (sure, they know what their paycheck is after taxes, but not what their exact tax liability will be). Using a percentage of gross income allows lower to middle income individuals to spend more on housing as a percentage of net, since their tax liability will be lower, and higher income individuals to spend less (housing costs shouldn't scale 1:1 with income as higher income individuals will also need to be saving more, pay more in taxes, etc.)
“ you know our rule of thumb for total spending on a home is to keep it below 25% of your gross income”
Curious on this, why do you guys make this a percentage of your gross? Shouldn’t this be on take home pay, since you make mortgage payments using after tax dollars? Sure, a counter could be “interest is deductible”, but on a fixed rate mortgage you will eventually reach a point where the majority of the payment goes to principal, at which point you can’t depend on the interest deduction.
Everyone knows what their gross income is, but not everyone knows what they make after taxes (sure, they know what their paycheck is after taxes, but not what their exact tax liability will be). Using a percentage of gross income allows lower to middle income individuals to spend more on housing as a percentage of net, since their tax liability will be lower, and higher income individuals to spend less (housing costs shouldn't scale 1:1 with income as higher income individuals will also need to be saving more, pay more in taxes, etc.)
Ah interesting, that makes sense, thanks Daniel!