Saving Money on Your Mortgage & Other Debts
Know the 28/36 Rule. Then Make the Numbers Work for Your Life.
Mortgage. Car payment. Credit cards. Another bill before the last one clears. When your paycheck already has a waiting list, saving money starts with seeing how much room you actually have.
Budgeting may have been simpler when you only had a couple of bills. Now there’s a mortgage, insurance, utilities, and a whole life competing for the same dollars. A useful guideline can help you get your bearings. A realistic plan helps you do something about it.
What’s the 28/36 Rule?
The 28/36 rule is a starting point: aim to keep housing costs within 28% of gross monthly income and total monthly debt payments, including housing, within 36%. Lender requirements vary. And a loan approval doesn’t know what your groceries, childcare, or next car repair will cost.
Here’s how those guidelines work for a household earning $8,000 per month before taxes:
Housing costs
$2,240 / month$8,000 × 28% = $2,240
Include principal, interest, property taxes, homeowners insurance, and applicable mortgage insurance and HOA dues.
PITI is shorthand for principal, interest, taxes, and insurance. Don’t forget the housing costs outside that acronym.
Housing + other debts
$2,880 / month$8,000 × 36% = $2,880
Include housing plus your other required monthly debt payments, such as car loans, student loans, and credit card minimums.
The 36% includes your housing payment. It isn’t another allowance on top.
If housing uses the full $2,240, that leaves $640 for other required debt payments within the 36% guideline. These are planning benchmarks, not a loan approval or a guarantee that a payment fits your circumstances.
Your DTI: Payments, Not Balances
Your debt-to-income ratio compares monthly debt payments with gross monthly income. Add your housing payment and other required monthly debt payments, then divide by gross monthly income.
Use monthly payments, not your total outstanding balances. A $20,000 car loan with a $400 monthly payment contributes $400 to this calculation, not $20,000.
A lower DTI can give you more room, but 36% isn’t a universal cutoff and 43% isn’t a universal ceiling. The requirements depend on the loan program, lender, and your financial picture.
The bank uses gross income. You buy groceries with what actually lands in your account.
Before calling a payment affordable, put it beside your take-home pay, everyday spending, savings, and upcoming expenses. Passing a ratio doesn’t mean the rest of your life fits.
28/36 and Your Credit Score
Your credit history matters when you apply for a mortgage. So do your income, debts, down payment, and the loan itself. No single ratio tells the whole story.
Shop the mortgage, not just the house.
A hard inquiry can affect your credit, but scoring models generally group mortgage inquiries made within a limited shopping window, typically 14 to 45 days depending on the model. Compare offers close together rather than letting fear of a credit check lock you into an expensive loan.
Compare rates, APRs, fees, and payments on similar loan offers. A comfortable payment and a competitive total cost deserve a place in the same conversation.
Working with a lower credit score? Read Can You Buy a Home With Low Credit? for more on your options.
Other Budget Tips: Give 50/30/20 a Reality Check
No matter what your financial situation is, a robust budget is going to be your friend. Sticking to it is easier said than done, though. Nobody is perfect, and a useful framework needs room for real life.
Unlike 28/36, the 50/30/20 framework starts with take-home pay:
Needs
Housing, utilities, groceries, insurance, transportation, and required minimum debt payments.
Wants
Dining out, entertainment, travel, and the extras you choose to make room for.
Savings + extra payments
Emergency savings, future goals, retirement savings, and debt payments above the required minimums.
Include required minimum payments with your needs so you don’t count them twice. If retirement contributions already come out of your paycheck, account for them consistently rather than counting the same dollars again.
Adjust the percentages to your circumstances. High housing costs, irregular income, or expensive debt may call for a different split.
Does It Fit Your Real Budget?
A ratio is a useful checkpoint. These questions tell you more about the month ahead:
- Start with what lands in your account. Use take-home pay for your spending plan. If income varies, test a leaner month too.
- Count the whole housing bill. Include taxes, insurance, HOA dues, maintenance, and repairs alongside the mortgage.
- Leave room for everyday life. Groceries, childcare, transportation, and medical expenses don’t disappear because a lender approves the loan.
- Plan for bills that don’t arrive monthly. Set money aside for annual premiums, upcoming expenses, and the unexpected.
- Give extra dollars a deliberate job. Balance your cash cushion, savings goals, and higher-interest debts before committing more to the mortgage.
Saving interest usually means reducing the rate, the balance, or the time you carry it. Your budget helps you see what you can put toward that goal without creating a cash shortage somewhere else.
Your Paycheck Needs a Plan, Not Another Spreadsheet.
Budgeting rules can give you a starting point. They can’t tell you what happens between this paycheck, the mortgage payment, and the car repair you weren’t expecting.
The Money Max™ Account brings your income, expenses, budget, and balances into one financial picture. Its forecasting helps you look ahead at cash flow and explore what different spending and payment choices could mean for your interest costs and projected payoff timeline.
Could you put more toward the mortgage? Should you tackle an expensive credit card first? How much room should you leave for what’s coming next?
Your Action Plan recommends payment amounts and timing based on your financial picture. Your Dashboard and Milestones help you see progress, while updates to your income, expenses, and balances keep your plan connected to real life.
Give your money a job before another bill claims it.
Schedule your free one-on-one Money Max walkthrough →
