Thinking about 2nd primary home but current market does not make sense.

[Joseph Henry]

Current home valued at ~850k with 50k left on mortgage. Wife and I are interested in buying a newer home (current home is 25 years old). Wife also thinks the current home is smaller with less closet/storage space and it has been on the back of our minds for a while. New homes we are interested in the suburbs are around 1.5M. Idea is to rent the existing home. Rent should cover expenses and have an additional $1k for the new mortgage. 

However, the numbers do not make sense. With a 20% down and a 1.2M loan balance and 7% rate, the first 7 years will amount to an interest payment of $560k. Even if the rates drop to 5.5%, that will still be $450k in interest payment alone over 7 years. Add $150k for property taxes. That is $600k to $700k just for interest and prop taxes. In 7 years, if the house price goes up to 2.2M, that will just break even. 

Am I doing the math right? Selling the existing home and bringing the loan balance down would be an option. What would you do in this situation? 

[Matt Devincenzo]

Quote from @Joseph Henry:

...What am I missing here?

It's your personal residence not an investment, so you can't "math" your way to an answer. The question is, does this purchase give us the space, location and amenities we want in our home? If so, can we afford it? 

It's like buying food or eating out, we don't approach every meal with a question of how we'll try to break even in 5 years. If we did it would all be lentils, brown rice and broccoli for every meal. The only other thing I'd consider is you should either sell your home now or within the next two years to get your OO 121 exclusion tax saving...I'm assuming you have close to or just over the $500k exclusion if you've owned for some time, so that's a huge one time only opportunity I'd use here.