How Much Rent Can You Afford To Pay?
To determine how much monthly rent you can afford, the following formula may be used:
Monthly Rent = ( 0.4x Gross Monthly Income) – Monthly Debts
Monthly debts include items such as car payments, card payments, installment loan payments, etc.
example, suppose you make $4,000 per month, have a car payment of $250
and credit card bills of $100 per month. Using the formula, you would
be able to pay $1,250 per month rent as follows:
Monthly Rent = (0.4x 4000) – (250+100) = $1,250 per month
table below shows typical results. Although your specific situation
may differ, the table and monthly rent formula may be helpful to you
for planning purposes.
Monthly Income Monthly Debts Monthly Rent
$2,500 $150 $850
$3,000 $200 $1,000
$4,000 $350 $1,250
$5,000 $400 $1,600
$6,000 $600 $1,800