How much of your paycheck should go to rent or mortgage? Plus, tools for lowering this bill

Many Americans pay more than they can afford for housing each month. 

Sixty-three percent of Americans are living paycheck to paycheck and 90% of them have less than $500 left over each month after expenses, according to the CNBC and SurveyMonkey Quarterly Money Survey.

Meanwhile, 43.5 million households — about a third of American families — spent more than 30% of their income on shelter in 2024, according to Harvard's analysis of the latest American Community Survey. That's the threshold the Department of Housing and Urban Development uses to identify those who are "cost-burdened." 

Lowering your housing costs could ease the burden, and it may be easier than you think. That 30% encompasses all housing costs, including homeowners and renters insurance, property taxes, and utilities. While you can't change what you owe in rent or how much you bought your house for, lowering these other expenses or your mortgage rate can help decrease your bill. 

Housing costs are more than just your monthly rent and mortgage payments. Here's what else you should account for:

• Renters insurance: An insurance policy — that you may be required to take out by your landlord — that protects the items you own inside your unit, some medical expenses if you or one of your guests gets injured on the property and emergency living expenses if something happens to the space and you can't remain there while it's being repaired.
• Homeowners insurance: An insurance policy that covers your house, personal belongings, and emergency living expenses if the dwelling becomes unlivable while repairs are being done, among other things.
• Utilities: Your monthly bill for essentials like electricity, gas, water, garbage removal, cable, internet, phone or television.
• Property taxes: What you put toward your property taxes each month if you own a home.
• Private mortgage insurance: Your monthly PMI bill if you own a home and have less than 20% equity in the house.

Here's how to figure out how much you can afford to spend on all housing expenses, whether you're renting or buying:

1. Multiply your gross income — or pay before taxes — by 0.30. 
2. Divide that number by 12. This is the maximum you should be spending. 

So here is that as a mathematical equation that you can plug your own numbers into: 

• MONTHLY HOUSING EXPENSES ≤ (GROSS ANNUAL INCOME X 0.30) / 12

With this in mind, a household earning the median income of $83,730 could comfortably spend $25,119 per year or $2,093.25 per month on housing expenses.

If you've crunched the numbers and realized you are paying more than you can comfortably afford, there are ways to lower those costs. Here's what you can do today. 

Shop around for insurance

Our insurance reporter recommends comparison shopping — including home insurance and renters insurance — when it's time to renew. That means reviewing your existing policy and getting quotes from two to three other insurers. She did, and saved over $1,000. 

If you're a renter who drives, we recommend Progressive, which offers bundling discounts for auto and renters insurance. If you don't drive or have a car, try Lemonade, which has discounts when you bundle other policies like pet insurance.

If you are a homeowner, consider Amica. It has the lowest publicly available rates, along with several bundling discounts, including up to 30% off for home, auto, umbrella and life insurance. 

Use a cash-back credit card on your utilities

Second, get paid for your bills with a cash-back card.

With the U.S. Bank Cash+® Visa Signature® Card, you can earn 5% cash back on your first $2,000 in purchases each quarter in any two categories you choose. Utilities, like electric, gas and internet, are eligible. 

See if you can get a lower rate on your mortgage 

Finally, ask your mortgage lender if there's a way to lower your rate, whether through a rate drop or refinancing. If your lender doesn't offer those tools, consider getting refinancing quotes from other lenders that may offer lower rates. 

In general, credit unions tend to charge less in interest because they are member-owned not-for-profits. That may be a good place to start. 

We like FourLeaf Federal Credit Union because it consistently offers below-average rates and doesn't have restrictive membership qualifications like many credit unions. Simply put $5 into a FourLeaf savings account. 

If you don't want to go the credit union route, we suggest Better. Not only does Better offer below-average rates, but it also has a program that allows you to roll the upfront costs associated with refinancing in the mortgage. Keep in mind that you'll pay interest on the total over time, which can help if you don't have the cash on hand to pay for closing costs.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every person finance product review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best mortgage products.

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