When potential homebuyers are getting ready to submit an application for a mortgage, most experts note that these individuals should devote no more than a certain percentage of their income to mortgage payments. For instance, for years, the rule was 20 percent: no more than 20 percent of a homeowner's monthly income should be devoted to the monthly mortgage payment. So, are South Florida residents following this rule?
According to a recent article, the answer is "no." The article noted that in 2016, homeowners in South Florida were, on average, devoting 22.1 percent of their monthly income to mortgage payments. That is higher than the 20 percent average in the 15-year span from 1985 to 2000 in South Florida. Also, it is higher than the national average from the end of last year, which stood at 15.8 percent of monthly income.
However, the increase in the amount that South Florida residents are spending on their mortgage payments may reflect a national trend of improvement in the housing market. As the recent article notes, the 15.8 percent national average at the end of last year was up from the 14.7 percent national average from 2015.
When considering the old "20 percent" rule when it comes to housing costs in relation to income, the South Florida average of 22.1 percent may not seem like such a drastic deviation. However, it is just another reminder that anyone who is considering jumping into the residential real estate market in the local area should make sure that they are looking over all of the relevant information to complete the transaction.
Source: Miami Herald, "Mortgage payments breaking the bank? You are not alone," Carli Teproff, Feb. 15, 2017