Korty Research has a spreadsheet which makes it possible to calculate the savings from selling one house and purchasing a less expensive house. The analysis can be used in the reverse as well. Many people consider such a move these days.
The spreadsheet allows you to change every significant variable:
Existing house price
New house price
Existing house debt
Existing mortgage rate
New mortgage rate
Existing house taxes, insurance, maintenance
New house taxes, insurance, maintenance
Projected return on cash out
Personal tax rate
Projected appreciation existing house
Projected appreciation new house
The results are very interesting. The savings are a good deal greater than most people would guess. Estimates of taxes and appreciation can be included in the calculations.
Example:
Selling a $1,000,000 house, buying a $400,000 house.
| SELLING LARGE HOUSE, BUYING SMALLER | |||||
| SUMMARY ANNUAL SAVINGS | CASH | SAVINGS | NEW HOME | ||
| COST | INCOME | SAVINGS | AFTER TAX | COST | |
| IF DEBT | NO MOVE | MOVE | |||
| $300,000 | -$44,073 | $10,000 | $54,073 | $45,556 | $400,000 |
| $500,000 | -$60,121 | -$2,000 | $58,121 | $48,335 | $400,000 |
| $700,000 | -$76,170 | -$16,024 | $60,146 | $49,338 | $400,000 |
| SELLING LARGE HOUSE, BUYING SMALLER | |||||
| SUMMARY 20 YEAR TOTAL COST OUTLAY AND SAVINGS | |||||
| SAVINGS | |||||
| NO MOVE | MOVE | CASH | WT EQUITY | NEW HOME | |
| IF DEBT | COST | INCOME | SAVINGS | & TAXES | COST |
| $300,000 | -$881,456 | $1,226,989 | $2,108,445 | $1,176,334 | $400,000 |
| $500,000 | -$1,202,426 | $1,063,882 | $2,266,308 | $1,284,731 | $400,000 |
| $700,000 | -$1,523,396 | $821,843 | $2,345,239 | $1,323,808 | $400,000 |
Contact Korty Research for a copy of the spreadsheet dougkorty@gmail.com
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