This Generation Is Spending the Most of Its Income on Housing

Are you a part of it?

It's not unusual for housing to be a person’s largest monthly expense. Often, owning a home is a far more expensive prospect than renting one. That's because homeowners have to cover costs outside of their mortgage payments, like property taxes, insurance, maintenance, and repairs.

It's important to not overspend on housing, as doing so could lead to financial struggles and unhealthy debt. But according to a recent Hometap report, millennials may be going overboard on housing. And that could really be hurting them financially.

Millennials are stretching their budgets

Hometap reports that millennials spend more of their income on housing than any other generation. But what's more alarming is that an estimated 33% of millennials spend over 26% of their income on their mortgage payments.

As a general rule, housing expenses should be kept to 30% of your income or less. But "housing expenses" encompass more than just a mortgage.

Specifically, that 30% figure should include predictable homeowner expenses like property taxes, homeowners insurance premiums, and HOA fees where applicable. If some millennials are already spending 26% of their earnings on just a mortgage, it's fair to assume that many are exceeding that 30% guideline -- and putting themselves at risk of falling behind on their bills across the board.

How to lower your housing costs

If you've already purchased a home that was a bit of a financial stretch for you, you may not have too many options for selling it and buying a cheaper one -- especially not in today's market, where home prices are up across the board. But that doesn't mean you can't shrink your existing housing costs.

If your mortgage is eating up too large a chunk of your income for comfort, then you may want to look into refinancing it. Doing so means swapping your existing home loan for a new one -- ideally, one with a lower interest rate to shrink your monthly payments.

You can also try appealing your property taxes if they've gone up a lot. That said, this year, that may be a difficult thing to do because of increased home values (the more your home is deemed to be worth, the higher your property tax bill is likely to be).

Another option is to call up your homeowners insurance company and see if it's possible to negotiate your premium costs. It may be that you've invested in safety features, like an alarm system, and are therefore eligible for a discounted rate. And remember, there's no rule stating you must use the same homeowners insurance company forever. You can always shop around for better rates if your current insurer won't negotiate.

It's not surprising to see millennials spending a lot of money on housing, especially given today's property values. But it's important to limit the amount of your income that goes toward owning a home. If you've been pushing yourself too far in that regard, it pays to see if there are steps you can take to lower your housing costs and ease that financial burden.