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I used a basic Monte Carlo technique to help buy a new house. We wanted to know what maximum price we could look at for the new house. But we didn't know how
by tunesmith 11y ago
I used a basic Monte Carlo technique to help buy a new house. We wanted to know what maximum price we could look at for the new house. But we didn't know how much cash I'd clear from the old house to sell, how much cash my wife would be able to contribute, what interest rate we'd lock at for the new house, etc. But, I could reasonably estimate a normal distribution that each of those scenarios would fall in, even if those distributions were pretty wide (to be conservative). Then I just made a row in excel that picked a random value from each, and calculated the maximum price we could afford for the new house in that case, and then I dragged that row down 10,000 times, and then we looked at what price we could afford in 95% of those cases. It helped our confidence a lot in knowing what we could definitely afford.