How much rent can I afford?
With buying a house increasingly out of reach for many, renting properties continues to be a popular option in the UK. Although it can be more expensive over the long run, renting can give you the independence of having your own space without the commitment of a mortgage. But just how much of your income should you use on renting a home?
Why is budgeting for rent so important?
As household rent tends to be your largest outgoing each month, knowing how much you can afford is essential for your peace of mind. It will help you get an accurate idea of what type of property you should be looking to rent as well as assisting you in achieving any other long term financial goals you may have.
What percentage of my salary should go on rent?
It all depends on how much you earn, where you live and your lifestyle. If you live within walking distance to your job, you may decide that paying a little more is justified as you won’t have to fork out for travel fares.
Maybe you lead an active social life and are out a lot, so you may want to save on rent to fund your other monthly activities. While these are isolated examples, it all depends on your situation.
As a rough estimate, at least from a landlord’s or agency’s perspective, you should be earning around 2.5 times the rental amount. This isn’t set in stone but it will give you an approximate indication of what you should expect to afford.
Research carried out by the Office for National Statistics (ONS) suggest that on average, as a nation, we spend around 27% of our income on rent. This varies from region to region with some areas involving spending as low as 18% while some more sought-after locations reaching close to 50%. The truth is that the real figure will be more if you factor in other costs involved with renting.
How much deposit can I afford?
Much like buying a property, renting often involves coming up with a deposit. Depending on where you want to live, it can run into the thousands. And if you’re moving into a furnished flat or home, you may be asked to pay more. Typically, a rental deposit will be between four to eight weeks’ rent, but be prepared for more depending on the landlord or agency.
How much are estate agent fees when you rent?
Unfortunately, estate agents don’t work for free. To cover reference and credit checks, as well as other administrative costs, most agencies will command a fee for doing the leg work for you. It’s worth having some cash set aside separate from your deposit to cover this, and to ask the agency upfront what this will likely be. The fees can vary quite a bit, and can reach several hundred pounds in some cases. It’s worth checking exactly what estate agents are allowed to charge, to make sure that you’re getting a fair deal.
Other rental costs
You may find rental properties that include all or certain bills in the monthly rent and some that won’t. From council tax to essential home utilities, it’s definitely worth finding out from the landlord or agency how much these will tend to be. As various types of bills are calculated differently, you should also find out how often they are paid, for example, monthly, quarterly or yearly.
Take stock of your monthly outgoings, especially any direct debits you’ve got set up. These can include things like subscriptions to streaming services, gym membership and mobile phone costs.
How much does it cost to move house?
Over time we accumulate a lot of possessions. Some of us do this more than others, but we never get a truer sense of just how much stuff we have until we need to move. If you’re lucky you might have a friend with a vehicle big enough to help you move, otherwise you’ll have to use a professional moving service. From taxis to specialist removal firms, you should get a range of quotes and factor this in to your cost of moving.
Planning out your finances ahead of time could help you reap the monetary rewards further down the line. Read our article on budgeting your finances to get a clear picture of your monthly expenditure and how it might affect your ability to pay rent.
- What is Marriage Tax Allowance?
- What happens if you don’t leave a will?
- Registering a death
- What happens to property after a divorce?
- Will a prenup protect me if I get a divorce?
- How much does a divorce cost?
- Looking after your credit score while you’re at university
- Guide to credit and debit card protection
- Cashless society and changing savings habits for kids
- Living and working on the UK Minimum Wage
- How to budget if you’re a single parent
- Infographic: Average Equifax Credit Scores across the UK
- How to budget at university
- Guide to sending money overseas
- How to budget for kids going back to school
- How the Budget 2018 will affect your earning, spending and saving
- Infographic: How much does it cost to get married?
- What is the workplace pension?
- Infographic: Millennials and money - What kind of side hustles are they doing?
- Budgeting for the holiday season - gifts
- Budgeting for a wedding
- Pension tools and resources
- Planning for early retirement
- Downsizing your home
- What will my state pension be?
- Budgeting for a baby
- Budgeting for a holiday
- An introduction to investments
- Budgeting for a funeral
- Financial planning for parents
- How transferring pensions works
- Helping elderly parents manage their money
- Budgeting for school holidays
- Looking after your financial documents
- New Year, new start to your finances
- How to avoid overspending on special occasions
- Financial Jargon Buster
- Getting Financial Help – The Best Online Resources
- Explaining the Different Types of Savings Accounts
- Understanding Payment Cards
- Money Saving Strategies – Tips on How to Save
- How to Budget Your Finances