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Comments about ‘Dave Ramsey says: Housing payment should be less than 25 percent of monthly income’

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Published: Thursday, July 3 2014 7:02 a.m. MDT

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Samson01
S. Jordan, UT

So someone making 100K a year is going to take home $5600 a month 25% of which is $1400. The payment on a 150K house on a 15 year term at 3% is (w/Insurance and taxes) Aprox. $1300.

Seems pretty unrealistic.

andyjaggy
American Fork, UT

It's very unrealistic, it would work a bit better on a 30 year mortgage, like you know, the rest of the world has. I like most of Dave's advice, but there are a few things I disagree with him on. I stopped listening to him when I noticed a trend that an above average amount of people calling in to his show made in excess of 100k.

Z
South Jordan, UT

If you are following the rest of Mr. Ramsey's advice, your 150K home with your 20% down payment (yes, that takes some financial discipline too), now has a Principal and Interest payment of $828 a month.

15 year is great if you can pull it off. Take a look at the interest savings some time. It will astound you. You may find that you don't really need quite as much house as you thought you did.

The key here is don't buy more house than you can afford. a few percentage points either way won't hurt you. But if all your income is tied up in your house, the rest of your future can be very constrained.

ipr
Spanish Fork, UT

The last two times we bought a house, we bought it with a 30 year loan. That way we were guaranteed a low mortgage payment, in case of emergencies, but we had budgeted to pay an extra $1000/month. The first time we paid off our house (in 12 years), we never had an emergency, but it did come 2 years later, when I had to be treated for cancer. It sure was nice to not have a mortgage. The second house was bought with an $85,000 mortgage (we had a large down payment, because we sold our house) with a 30 year mortgage. We were able to pay it off in 3 years (we had a very tight budget). Once again our house is paid off, and a year later I faced a whole year of chemo therapy. And again there was no problem, because the house is paid off. Oh, and our income was just a little over $100,000. I love the option of a 30 year mortgage, and if you pay it off fast, it really doesn't matter if the interest is a little higher. In both cases our interest was 7%.

JLindow
St George, UT

I disagree with the advice of paying of the mortgage as quickly as possible.

By investing the extra money that would be required to pay off the mortgage more quickly, the money is working harder and remains a liquid asset that I can draw on in times of need.

patriot
Cedar Hills, UT

I agree with many of the posts - Ramsey is out of touch with reality for most people. The 25% number is hard to meet for most people in today's economy. I listened to Ramsey for a week and I heard plenty of people talking about how they pumped 75% of their monthly income into paying down their home loan and Dave was all praise. Ramsey is a smart guy but alot of his advise is just not living in reals-ville for most folks.

Quickslow87
Dallas, TX

If your monthly payments total more than the standard deduction, it could lead to significant tax savings. Please consult a tax adviser before pursuing that strategy.

My10Cents
lehi, UT

Dave Ramsey gives general rule of thumb advice. It isn't tailored to individual circumstances, but it is meant to be generally applicable. However, it doesn't apply to everyone. Nevertheless, I disagree that his advice isn't living in "reals-ville". If you are serious about financial security (ie reducing financial risk) then you must make sacrifices. Depends on what you want and are willing to do. His advice requires significant changes for most people and it can be PAINFUL, but it is very possible. Do you want to have a big house now or pay for your kids college? Do you want the fancy, new car or no mortgage? It is a trade off.

Also, paying off your mortgage early instead of investing the extra money isn't about the returns. It is about the risk. Sometimes the peace of mind of not having a mortgage outweighs (think reduced risk or the perception of that reduced risk) the slightly less optimal financial returns.

Ute in NV
Henderson, NV

I agree that Dave's advice is a general rule of thumb, but it looks like most people don't understand Dave's approach. Paying off your mortgage early is baby step 6 in his plan. Step 1 is $1,000 emergency savings. 2 is the debt snowball (i.e., pay off all non-mortgage debt). 3 is 3-6 months savings. 4 is 15% of income to retirement. 5 is save for your kids' college. Only then you hit step 6 which is pay off your mortgage early.

If you have absolutely no other debt payments, you already have 6 months savings, you are contributing 15% to retirement plans, and you're funding college savings for the kids, what's wrong with the advice of paying off the mortgage and getting completely out of debt? I'm not a hard-core Ramsey disciple in all respects, but I have a hard time believing that anyone that does choose to follow his plan won't be better off and probably way better off than most people who choose not to.

ManInTheMiddle
SANDY, UT

People spend way too much time focusing on reducing expenses and not nearly enough time focused on increasing their revenues.
Expenses can only be cut so much - revenues can grow forever....
Worry more about increasing your revenue...

81Ute
Central, UT

Very entertaining comments.

It is easy to understand how we have become a slave nation to debt and status. Those who advocate a 30 year mortgage, do the math, you will pay more in interest than the purchase price of your house. Those that advocate the a greater percentage of income to house: you spend too much on transportation too (status car) don't you?

Yes, I practice what I preach, house payment ~ $1500/mo < 20% of our net. Before you start with the wigwam/hogup comments it is 4500 sq ft 4 car garage and separate shop on 2 acres.

Save your money, luck comes to the prepared.

AFCoug
Colorado Springs, CO

@samson01

Do the math again. $5600/mo does not equate to $100k. Even after taxes you are looking at about $6200-6500/mo. That is a $1500 mo house payment. Very resonable if you can get 20% down. On a 15 yr loan you'd be looking at about a $250k home. No mansion but certainly a nice home.

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