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A Guide to How Much Rent You Can Afford

Before you sign a lease on a house or apartment to rent, it is important that you first look at your finances and have an understanding of how much rent you can afford without falling behind or in debt. Missed rent payments can lead to eviction or negative marks on your credit score, which can later jeopardise your ability to buy a home or be approved for another rental agreement. Only agree to pay what you can afford.

Percentage of Income

According to the Trulia Real Estate Search website, you should rent a place that costs you no more than 33 per cent of your annual pre-tax income each year on rent and utilities. To calculate this number, multiply your total pre-tax annual income amount by 0.33. This will give you the total amount you should spend each year on rent and utilities. Divide that number by 12 to get the monthly payments. For example, if you make £19,500 a year, your total annual rent and utilities cost should not exceed £6,435, or £536 each month. Of course, if you find a place that you like for less than 33 per cent of your annual income, that is fine; the less you pay on rent, the more you can use for savings, investing or paying off debt.


If your rent and utilities should cost no more than 33 per cent of your income, then it is important to examine the utility costs in addition to the rental fee. Utilities include heat, electricity, water, electric, gas, trash pick up and other bills like cable TV. Not all houses or apartments will require you to pay all of these; some utility costs may be included in the rental price or do not apply to the house or apartment. But, rental costs vary greatly, depending on the place, location and seasons. A heating bill can easily cost over £65 in the winter, but can cost nothing in the summer. Ask the landlord to share utility history from the past year, then add that number to the annual rent payment. If it is over 33 per cent, the utilities and rental payments combined are likely too much for you.


If you have a lot of debt, consider finding a place that costs less than 33 per cent of your annual income. This will help you afford high debt payments each month, or allow you to may more than the minimum payments to pay off the debt faster. Your debt-to-income ratio is the amount of debt you owe compared to the amount of money you make. U.S. News indicates that your total debt should be 36 per cent or less of your total income. To calculate this number, add up all your monthly expenses, like credit card payments, utilities and loans, and divide that number by your total monthly income. For example, someone with £650 in monthly expenses and a £2,600 monthly income has a debt to income ratio of 0.25, or 25 per cent. If your debt to income ratio is at or above 36 per cent, you should find a place to rent that is closer to 20 or 25 per cent of your income.

Afford a Place with High Rent

If you find a place to rent that you absolutely love, but the rental and utility costs are higher than 33 per cent of your income, it is still possible for you to afford the place. However, you need to make adjustments in your financial life to do so. For example, find a roommate to help pay for rental and utility costs to help bring your total payments down to a more manageable level. Or, increase your income by taking a second job, asking for a raise or doing odd jobs for people like mowing lawns, gardening or walking dogs.