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I'm buying a house and decided against renting out a place because I feel like it's almost a waste of money, and, most importantly, the rent of a small 40 m^2 apartment in the middle of nowhere is the same as the mortgage of a two bedroom apartment in a nice area.

But I have no idea if I will be paying too much for the next 30 years.

I have a net income of about 24k euros a year, which in my area, at my age, it's not too bad. The job is also very stable.

The mortgage will be around 550€ a month, so about a third of my net income. I know that for a house there will be other expenses but I think I can manage.

The other "big" expense is the car, that will be payed off in about a year.

Am I spending too much? How much of my income should I be spending on mortgage?

If it matters, I live in northern Italy.

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  • 4
    FYI don't assume the cheapest option is 30 years... in my case the bank offered a 20 year mortgage with a lower interest rate than the 30 year option. The monthly payments would have practically been the same, but in the 30 year option I would have paid >>100k€ more in interest in the end! Get more than one quote and ask for both 20 and 30 years mortgages options.
    – GACy20
    Jan 21 at 16:11
  • @GACy20 Oh, that's good to know, thanks!
    – Yeeter
    Jan 21 at 16:19
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    Since you are in Italy I recommend to have a look at mutuionline.it. It's a search engine that lets you quickly and easily compare the mortgages offered by several banks, setting the amount and the duration. No affiliation. Jan 21 at 18:38

1 Answer 1

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A popular rule of thumb is to spend not more than 35% of your income on housing. Note that this should ideally include utilities, taxes and a budget for maintenance as well, not just rent or the mortgage payments. However, in many areas this is hardly possible for normal incomes.

A more precise approach is to do some household accounting. Track all your expenses for some time and do not forget payments that ocurr only once a year and things like a new car that come every few years.

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  • Well, 550€/m of a net 24k€/y job is ~27.5%, so OP would have to spend ~150€ a month for utilities etc. In Italy there are no taxes for the home where you have your primary residence, you only pay taxes when you buy/sell or for houses where you do not have your primary residence. Maintenance is a thing... but that you also (partially) have when you rent. So they are not that far off 35% I think, considering that their wage should increase while a fixed interest mortgage shouldn't...
    – GACy20
    Jan 21 at 16:08
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    I would presume that an apartment would have some sort of 'condo' fees for maintenance of the shared space/utilities and exterior. Make sure to consider those. This actually makes it a bit easier to estimate the maintenance costs.
    – JimmyJames
    Jan 21 at 17:53
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    In the US, condominiums sometimes have extra assessments for large unplanned maintenance expenses. It's wise to have an emergency fund for such expenses. I don't know whether or not this is common in Italy. Jan 21 at 19:44
  • @BrianBorchers I wouldn't say it's common, but it does happen.
    – Yeeter
    Jan 22 at 18:10

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