If you own a home in a high-cost-of-living city, it can be depressing to think about how much more house you could afford in a less expensive area. Your out-of-town friends and relatives might even think you're crazy for spending so much. "You could have a mansion where I live for that price!" they exclaim.

However, you and they might be surprised to learn that the $500,000 you can afford to pay for a home in a high-cost-of-living city, such as New York, San Francisco or Honolulu won't always translate to $500,000 you could spend on a home in Baton Rouge, Phoenix or Missoula. This article will explore 10 reasons why housing in lower-cost-of-living cities isn't necessarily as much of a bargain as it seems. Before uprooting your life, evaluate these items for the different cities you are considering and make sure the financial benefits of moving will be as large as you think.

1. Heating and Cooling Costs
If your high-cost-of-living city has a moderate climate (think Los Angeles or San Francisco), your energy bills are probably significantly lower than what your friends in Minneapolis pay to heat their homes in the winter or what your friends in Little Rock pay to cool their homes in the summer.

Not having to spend as much money on heating and air conditioning frees up more money to spend on a house. At 6% interest, an extra $100 a month translates to an extra $16,500 in purchase price; an extra $200 means $33,000. If you can afford a $500,000 San Francisco home, you might only be able to afford a $467,000 Minneapolis home.

Of course, $467,000 still buys a lot more house in Minneapolis. Also, this scenario could work in reverse if you were moving from cold and expensive New York City to warmer and less expensive Atlanta. (Learn more about how to cut utility bills in Ten Ways To Save Energy And Money.)

2. Property Taxes
Property tax rates vary significantly among cities (and sometimes within cities). 2008 rates include 1% in Los Angeles, 2.5% in Houston and a whopping 12.1% in New York City. Property taxes are based on the home's assessed value, so a home that is assessed at $500,000 would have annual property taxes of $5,000 in Los Angeles, $16,000 in Houston, and $60,500 in New York City.

However, a home that would be assessed at $500,000 in one city might be assessed at a higher or lower amount in another city. Each city has its own formulas for determining the value of a property. Before you move, find out what the property tax rate is and how home values are assessed in the area you're considering relocating to. (To learn more, read Five Tricks For Lowering Your Property Tax.)

3. Home Maintenance Costs
Your friends may be able to afford a McMansion for the same price as your bungalow, but with a house that is two or three times larger, you can expect to see many bills that are two or three times larger. Examples of expenses that will increase with size are:

Unlike your mortgage, these expenses don't go away one day they'll be around for as long as you live in the house. Your big mortgage may be expensive now, but the other costs associated with maintaining a smaller home will always be relatively low. (Read more in Four Overlooked Homeownership Costs.)

4. Furnishing Costs
Bigger houses require more furniture - well, they don't require it, but few people like to have empty rooms in their homes. And if you buy your furniture new, the cost to furnish and decorate all that extra square footage can become significant. In fact, this is an area where some first-time homeowners get themselves into trouble financially. (Read how to get better deals on furniture and other big-ticket items in 12 Ways To Shop Smarter.)

5. Remodeling Costs
If you stay in your house for a long time (or even if you don't and you want to maximize your resale value), at some point you will probably end up doing some sort of remodel. And this isn't a bad idea - it can add value to your home. It is often a less expensive way to increase your satisfaction with your home than moving, which would force you to pay transaction costs, like broker fees and mortgage financing costs. (Learn more about the extra costs associated with a mortgage in Score A Cheap Mortgage.)

Let's say you want to put hardwood floors in your living room, dining room, hallway and bedrooms. For a home where these areas occupy 1,000 square feet, this project will probably cost you a minimum (including installation) of $10,000. Double or triple the size of the house, and the remodel suddenly becomes much more expensive - maybe even prohibitively so. The same goes for a project like a kitchen overhaul - the bigger the kitchen, the more cabinets, countertop and tile you'll have to buy and the more the labor will cost to install everything. (To learn more, read Add Value To Real Estate Investments.)

6. Average Age of Homes in the Area

In many neighborhoods, most homes tend to be a certain age. In older neighborhoods, it's not uncommon to own a house that's over 100 years old. In newer areas, homes built in the last 50 years predominate. Unless a previous owner did major work to the home, the older the home is, the more major repairs it's likely to need. Older homes can need heating, ventilating and air conditioning (HVAC) upgrades, new windows and new plumbing, just a few potential major repairs.

(Consider a home inspection to bring potential problems to your attention. Read Do You Need A Home Inspection? for more information.)

7. Keeping Up With the Joneses
If the same house price buys you into a nicer neighborhood in another city, it might also buy you into a lifestyle that you can't afford.

  • In Washington, D.C., $500,000 might buy you a starter house in a lower-middle- or middle-class neighborhood where there will be little social pressure to do things that can blast through your disposable income.
  • In Omaha, that $500,000 home may be in a posher neighborhood where it may be the norm to drive a luxury car, wear designer clothes or succumb to other expensive lifestyle choices, like joining the local country club, throwing lavish parties or sending the children to private school.

Unfortunately, many people lack the psychological strength to remain impervious to these pressures. (Read more about the trappings of success in Stop Keeping Up With The Joneses – They're Broke.)

8. Differences in State and Local Income Taxes
Moving from a high-cost city to a low-cost city might not make you better off if the move results in higher taxes.

If you live in Seattle, Washington; Manchester, New Hampshire or Anchorage, Alaska, the cost of housing will be on the higher side, but there is no state income tax. New Hampshire,Alaska, and Oregon also don't have a state sales tax. This means that, compared to people in more heavily taxed states, you'll have more money available to spend on housing, helping to balance out some of that higher cost of living. Permanent residents of Alaska receive a dividend of at least a few hundred dollars every year from the Alaska Permanent Fund. So, if you're moving from one of these no-tax states to a higher-tax state, you must factor this new cost into your budget.

On the flip side, if you are moving from a city with a high cost of living and a high state tax rate to a city with a low cost of living and no state tax, you might find a real bargain, as long as you can get a good job in the new location. California's state income tax is between 8% and 9.3% for most people, and in New York City most people pay state taxes of 6.85% plus local taxes of around 3.6%. If people in these states moved to Tennessee,Florida,South Dakota,Nevada,Texas orWyoming, they could see a real difference in the amount of money they have to work with and the amount of house they can afford. Remember, tax rates are subject to change, so be sure to check your jurisdiction for updates. (Read The Mortgage Interest Tax Deduction for another way to save on your taxes.)

9. Transaction Costs
If you want to move from high-cost Los Angeles to low-cost Des Moines, don't forget that selling one home and buying another will eat into your gains. You'll have to pay a 5-6% real estate agent's commission and closing costs on a new mortgage. Also, you'll probably put some remodeling money into the house you're selling to maximize the sale price and possibly into the new house to tailor it to your tastes. (Learn more about presenting your property for sale, read Staging Your Home For A Quick Sale.)

10. Interest Rates
Your friends with the $250,000 mortgage in Phoenix might be paying 10% interest, because that was the prevailing market rate at the time of their purchase, giving them a monthly mortgage payment of $2,194; meanwhile, you may have a $500,000 mortgage in San Jose, but if your interest rate is only 5%, because rates were lower when you purchased, your mortgage payment would be $2,684- just $500 more per month than what your friends pay. (To learn more, read How Will Your Mortgage Rate?)

Of course, as with some of the other factors discussed above, the interest situation can also work in reverse and further intensify the difference between low- and high-cost cities: a $250,000 mortgage at 5% costs $1,342 per month, while a $500,000 mortgage at 10% costs $4,388 per month a difference of a whopping $3,046 per month.

When it comes to the cost of owning a house, purchase price is far from the whole story. Your money may go further in a lower-cost-of-living city, but perhaps not as far as you think. Remember, cost isn't the only factor in deciding where to live: career, lifestyle and proximity to friends and family also play an important role. Before you uproot your life in search of greater financial security, do the detailed math for the locations in question and see what kind of financial change you're really looking at. Make sure the difference is significant enough to make your move worthwhile.