What Is a Rent Affordability Calculator?
A rent affordability calculator is a useful tool that can help you determine how much you can spend on rent, based on such variables as your earnings and your debt level. It can save you the trouble of breaking out pencil and paper or using your mobile phone’s calculator app. What’s more, it can be a convenient way to compare scenarios as you consider different rental options.
How to Use the Rent Affordability Calculator
Here are the moves to make to use the affordability calculator for rent.
Step 1: Enter your earnings
Your first step is to enter in your monthly gross, or pretax, earnings. This tells the calculator the income you are working with.
Step 2: Add your debt
Next, tally up the amount you pay monthly toward debt. You can use the minimum payments you typically make toward your credit card spending and student, home, personal, and other loans.
Step 3: Select your allocation level
When using the rent affordability calculator, you’ll enter in the percentage of your income you are comfortable putting toward rent. Experts advise no more than 30%. With this tool, you will select among 25%, 30%, and 35%. The highest figure may be the best choice for those living in high-priced areas.
Step 4: Find your maximum monthly rent
Once you have completed the above steps, the rent affordability calculator will show you the maximum amount to spend on rent to stick to your budget.
Benefits of Using a Rent Affordability Calculator
Using a rent affordability calculator has a number of advantages.
• Quick calculations: It does the math for you, saving you time and energy.
• Smarter decision-making: It can help you see how much you can afford if you allocate a higher or lower percentage of your earnings toward rent. Then you can make an informed decision about how much to spend.
• Informed comparison shopping: When comparing available properties, you can see where they fall versus your target rent payment.
• Better budgeting: It can help you budget effectively and know your limits in terms of how much to spend on rent every month.
How to Use Rent Affordability Calculator Data to Your Advantage
When working with the rent affordability calculator, you can use the output to your advantage in a number of ways. You can see whether your current rent could be positively or negatively impacting your budget. If your rent is too high, it may be limiting your ability to put cash into a savings account or even keep up with your monthly bills.
The calculator can also help you evaluate whether moving to a pricier home makes sense. Say you just switched jobs and will now be earning more. The affordability calculator for rent can reveal how much more you can comfortably spend while still managing your money well.
Or you might use it to see how much rent you could afford if you lowered the percentage of your paycheck spent on housing. Perhaps you want to start putting more money into savings for an emergency fund or for a wedding. The calculator can show you what, say, rent that’s 25% of your earnings looks like versus spending 35%.
Types of Rental Properties
As you think about renting a home and how much to spend, it can also be a good idea to familiarize yourself with the different types of rental properties. Just as with properties you might buy with a home loan, they come in different configurations:
• Single-family home
• An apartment. This could be an apartment in a large building or complex, or what’s often called a multi-family unit, such as a duplex which is one unit in a two-unit structure.
• Sublet, in which you pay to rent a property which is leased in someone else’s name. You become their subtenant.
• Shared home, in which you and others are essentially roommates, having both private and shared spaces in a property.
Examples of Rental Scenarios
When using the rent affordability calculator, you may consider different scenarios that can help you make informed financial decisions.
• Scenario 1: Say you earn $10K a month, have $1K in monthly debt payments, and want to put 25% of your income toward rent as you work to pay off your student loans and start saving to buy your first home. Using the calculator, you’d learn that you can afford $1,500 per month for your rent.
• Scenario 2: In this scenario, you might earn $10K a month, have only $300 a month in debt payments, and want to put 35% toward rent because you live in a city with a high cost of living. In this case, you can use the rent affordability calculator to see that you can go shopping for a rental of up to $3,200 a month.
Recommended: Cost of Living in the U.S.
Rent Affordability Tips
Many people are interested in keeping costs down, and the realm of rent is no exception. Try these tips to make your rent as affordable as possible.
• Try to stick to spending no more than 30% of your income on rent, if possible. Financial experts suggest this percentage is wise for overall budget health. If, however, you live in a high-priced area, this may be challenging to achieve.
• Look for move-in specials. Some landlords may offer discounts during slow periods of the year or when a new building opens and they are eager to fill it up. You might snag, say, a month or two of free rent.
• Build your credit score. Many landlords review credit scores of applicants. Having a higher score could mean you are chosen over other potential renters when a well-priced property comes on the market.
• Consider taking in a roommate or moving to a less pricey neighborhood to cut costs. You might check out lists of the best affordable places in the U.S. if you are considering a move.
Recommended: Down Payment Assistance Programs
The Takeaway
Using an affordability calculator for rent can help you see how much you can spend on rent based on your income, debts, and budget parameters. It can help you compare options and manage your money better. In this way, you can take as much care when determining your rent as you would when calculating how big a mortgage you can afford when buying a home.
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FAQ
What information do I need to use a rent affordability calculator?
To use a rent affordability calculator, you should have the following information available: your monthly gross income, your monthly debt payments, and what percentage of your income you are aiming to spend on rent. The calculator will do the rest.
Does the calculator use my gross income or my net (take-home) income?
The affordability calculator for rent uses gross (or pretax) income versus net, or take-home, pay.
What is the “30% rule” for rent affordability and how does the calculator use it?
Financial experts typically advise spending no more than 30% of income on rent. The calculator can be set with this percentage, or you can select 25% (if, say, you want more funds available to save or pay down debt) or 35% (which may suit those who live in areas with a higher-than-average cost of living).
Can a rent affordability calculator help me budget for other monthly expenses besides rent?
While a rent affordability calculator is focused on what amount to spend on rent, it can have a ripple effect. If you get your rent into a good position versus your income and debt level, the rest of your budget may fall into place more easily.
How does a rent affordability calculator account for my debts, such as student loans or car payments?
The affordability calculator for rent asks you to add up your monthly debt and enter it into the tool. This would include the amount of your minimum monthly credit card payments as well as student, auto, and personal loans.
Does the calculator include the cost of utilities or renter’s insurance in its estimate?
The rent affordability calculator does not include utilities or renter’s insurance in its estimate of how much rent you can afford each month. Rather, those are items to be accounted for in your monthly budget.
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