How Much Rent Can I Afford?

Few purchases demand committing to an entire year's worth of spending, but your lease will. If you’re like most people, a lease is your largest financial responsibility, and you want to get it right. Finding the perfect balance between a desirable living space and financial stability is important to everyone, so how can you determine how much rent you can really afford? 

There are two main ways to calculate how much rent you can afford each month. These are the 30% rule, which is the most common, and the 50/30/20 rule. Here, we’ll explore them both, help you calculate them with our handy tools, and call out some other factors you should consider before signing a lease. Let’s jump right in!

Calculate Your Rent With the 30% Rule

The 30% rule is quite simple: it states that you should spend no more than approximately 30% of your pre-tax monthly income on housing. So, if you make £3,000 a month, you should try to spend around £900 a month max on rent.

The 30% rule is a good rule of thumb to start with, but it’s a broad generalisation. It won’t accurately account for every circumstance, so make sure you account for other factors like the following:

• City and Region: In London, you may have no choice but to spend more than 30% of your monthly income on rent. However, if you’re renting in the Northwest or Yorkshire, you might be able to get away with spending closer to just 20% of your income on rent.
• Transportation: If you live in a city centre, you might not need to spend as much on transportation costs. However, if you live outside of a city and most of your trips require a car, the cost of transportation can start to add up. Keep this in mind, as a lower rent outside the city might not equate to real savings.

30% is a good number to aim for, but it’s not always realistic. The vast majority of Londoners are rent-burdened, meaning they spend more than 30% of their monthly income on rent. If your area has been hit hard by the cost-of-living crisis and you have to spend more than 30% of your income on rent, don’t beat yourself up over it. Instead, focus on the other areas in your budget that you have more control over, like groceries, and work on saving in those areas.

Calculate Your Rent With the 50/30/20 Rule

The 50/30/20 rule is a broader budgeting tool. It states that you should aim to spend:

• 50% of your income on necessities like rent, bills, groceries, and debts
• 30% of your income on wants like entertainment or pints with your mates
• 20% of your income on savings

Again, the 50/30/20 rule doesn’t perfectly apply to everyone’s financial situation. If you use it, make sure you are accurately accounting for all your needs, including credit card payments, phone plans, a TV licence, utilities, and more.

Other Things to Remember When Looking For a Flat

When you’re looking for a flat, don’t make the mistake of only considering the price of rent. Make sure you account for the following:

• A tenancy deposit (usually around a month’s rent)
• A TV licence
• Council Tax
• Water, gas, and electric bills
• Service charges (like bins and maintaining common spaces if you live in a larger building)
• Contents or renters insurance
• Internet and WiFi connectivity bills

In short, more goes into the cost of renting than rent alone. Keep these additional fees in mind before you sign a lease.

Tips for Reducing Your Rent Burden

From London to Leeds, everyone in the UK could do with saving a couple quid on rent each month. Here are five tips for keeping more of what you’ve earned.

1. Share the cost: Splitting rent between yourself and a friend or significant other is one of the easiest ways to dramatically reduce the cost of living. Just make sure you trust the person you’re renting with, and don’t rush into anything—you could end up paying even more if they turn out to be less-than-reliable.
2. Be thorough with your search: While big-name apartment search sites will give you some listings, you may be able to find better deals off the beaten path. Scour Facebook Marketplace, Gumtree, and classified print ads for affordable units. Often, landlords who own just one or two units will use these marketplaces. Just be careful of scams and spam—if a listing seems too good to be true, it probably is.
3. Negotiate rent: While you won’t always be able to negotiate a lower rent, you have nothing to lose by trying. Some rent prices could be inflated with the expectation that you’ll negotiate to bring it down slightly, so always shoot your shot. Additionally, landlords can sometimes sweeten the deal by waiving move-in fees or the first months rent in exchange for signing a lease quicker.
4. Look for apartments during the off-season: Most leases start and end in the spring and summer months. During this time, many people are desperate to find a new place and will pay more than they should out of desperation. However, if you can delay your move into the ‘off-season,’ you’ll be in a better negotiating position, as it will be landlords who are keen on renting vacant flats.
5. Know your rights as a tenant: If you live in London, your landlord needs a licence for the property you live in. If they don’t have that, they might owe you big time. You can check your property via the City of London’s website. Finally, always take the time to read through your lease so you know what you’re getting into.

Build Your Credit Score While Renting

Your credit score can play a significant role in whether you’re approved for an apartment, flat, or house. Therefore, maintaining a good credit score is one of the best ways to save on renting costs.

The Pave app makes building your credit score easier. With Pave, you can see your upcoming bills so you don’t damage your score with missed payments, and we’ll report your timely payments to the UK’s three major credit reference agencies, Equifax, Experian, and TransUnion to give your score a boost.

To learn more about Pave and see why hundreds of thousands of Brits have used the app to build their credit, download Pave from the App Store or Google Play today!

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