Home Price Comparison

Home Cost Comparison & Opportunity Cost Calculator – Methodology

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Overview

This calculator evaluates the true monthly and annual financial impact of purchasing a new home compared to your current housing costs. Unlike basic affordability tools, this calculator incorporates:

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• Monthly housing expenses (mortgage, taxes, insurance, HOA, parking)

• Current housing expenses (rent/mortgage, insurance, parking)

• Opportunity cost of savings used for a down payment

• Changes in investment interest income

• Cash-purchase vs. mortgage scenarios

• Fully amortized loan payments based on rate and term

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The result is a clear, quantified comparison showing whether the new home will save money or cost more, including the financial impact of lost interest on savings.

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1. Current Interest Income From Savings

If you have savings sitting in an interest-bearing account (money market, CD, or high-yield savings), this tool calculates how much income you currently earn each month.

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Formula

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Current Monthly Interest=(Savings × Annual Interest Rate) / 12

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This value represents opportunity cost—income you lose if savings are used as a down payment on the new home.

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2. Current Monthly Housing Expenses

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Your existing housing expenses are added together to establish a baseline for comparison.

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Components

• Rent or current mortgage

• HOA (if applicable)

• Insurance

• Parking

 

Formula

 

Current Housing Expenses=Rent/Mtg + Insurance + HOA + Parking

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3. New Home Monthly Housing Expenses

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When evaluating a new home purchase, the calculator determines ongoing monthly costs based on mortgage financing or cash purchase.

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3.1 Mortgage Calculation

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If a mortgage is used, the tool computes the fully amortized monthly payment:

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Loan Amount

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Mortgage Amount=Purchase Price−Down Payment (Savings Applied)

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Monthly Payment Formula (Amortized Loan):

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M = P × [r (1 + r)^n ] / [(1 + r) ^n − 1]

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Where:

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• P = loan principal

• r = monthly interest rate (annual rate ÷ 12)

• n = number of monthly payments

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3.2 New Housing Expenses

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New Housing Expenses=M+Insurance+Taxes+HOA+Parking

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If the purchase is a cash purchase, mortgage values default to $0.

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4. New Interest Income (Remaining Savings)

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After the down payment, any remaining savings continue earning interest. The calculator shows this reduced interest income:

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New Monthly Interest=Remaining Savings × Interest Rate / 12

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5. Housing Expense Change

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This shows whether the new home’s ongoing expenses are more or less than your current housing costs.

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Housing Change=New Expenses−Current Expenses

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• Negative value = monthly savings

• Positive value = monthly cost increase

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6. Lost Interest Income (Opportunity Cost)

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When savings are used toward a home purchase, the interest they previously earned disappears.

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Lost Interest Income=Current Interest−New Interest

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This is a crucial part of evaluating the total cost of a home purchase.

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7. Total Net Monthly & Annual Impact

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The calculator combines the change in housing costs with the change in interest income to determine the true financial impact.

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Net Monthly Impact

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Net Monthly Impact = Housing Change + Lost Interest Income

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Net Annual Impact

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Net Annual Impact=Net Monthly Impact×12

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This final number tells you whether the new home will save money or cost more, accounting for both cash flow and opportunity cost.

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Example (Sample Calculation)

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If:

• New housing expenses are $332 less per month, but

• Lost interest income is $4,455 more per month,

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Then:

 

Net Monthly Impact=−$332.43 + $4,455 = $4,122.57

 

The new home costs approximately:

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• $4,122.57 more per month

• $49,470.84 more per year

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