Just How Big Should Your Monthly Mortgage Payment Be?

Your home mortgage will likely be one of the larger debts you take on. Since you'll be paying this debt for many years, you'll want to be sure you make smart, informed choices about it. And, most importantly, you will want to avoid committing to a mortgage payment that is too large.

If your home loan payment costs you more each month than you can comfortably afford, it will be a source of financial stress for you for years to come. To make sure that doesn't happen, consider these tips to help you decide just how big your monthly mortgage payment should be.

Don't spend more than this percentage of your income

Many mortgage lenders will allow you to take on a home loan that comes with payments equal to about 28% of your income.

However, it is typically best to cap your costs at around 25% of monthly income. If you can do that, it will leave you with 75% of your income left for other things like saving for retirement, putting money into savings, and covering other necessities.

On the other hand, if your housing costs exceed 30% of your income, this is generally defined as being "house poor," or cost burdened. In this situation, you would likely be left with too little money to pay for everything else that you need and still set yourself up for long-term financial success.

Consider all of your financial goals when deciding what you can spend

The rule of thumb that says to spend 25% of your income or less on your home is a good one and it makes sense for most people to follow. But if you want to make absolutely sure your mortgage payment isn't too big, you should consider an even more personalized assessment of what you can afford.

READ MORE: How Much House Can I Afford?

You should think about all of your financial goals, what it will take to accomplish them, and how your housing costs will impact that. If you're committed to early retirement, for example, you may need to put aside 25% of your monthly income (or more) to retire by your desired age. If you're doing that and devoting 25% of your money to housing costs, that only leaves you with half your pay to cover everything else. That may not be feasible.

To decide what size monthly payment makes sense for you:

• Add up your other fixed expenses, such food, the costs of raising your kids, transportation expenses, and other essential costs you incur each month.
• Figure out how much you need to save for other things, including retirement, big purchases, and vacations.
• See how much is left over for housing costs, including for your mortgage, property taxes, insurance, HOA dues, utilities, and home maintenance.

By going through this exercise, you can see how much comfortably fits in your budget for mortgage payments. If you can afford a house on that amount, then you're ready to move forward. If you can't, you'll have to decide if reassessing other financial goals to up your housing budget is worth it or if you'd prefer to wait a little longer to buy.