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The homeowners are past clients I helped obtain a mortgage several years ago.  They were looking to purchase a second home in a resort area, to enjoy with their adult children and grandchildren.  The purchase price was approximately $900,000.  The decision they wanted to discuss with me was how to finance the acquisition of the second home.  They were evaluating the following options:

  1. Pay cash for the entire purchase price, approximately $900,000, using funds from their investment account.
  2. Obtain a mortgage on the second home property to facilitate the purchase. The question was how much the down payment should be and how much the mortgage should be.
  3. Obtain a mortgage on their primary house to facilitate the purchase. The question was how much the down payment should be and how much the mortgage should be.

One of the homeowners is a semi-retired Certified Public Accountant while the other is a semi-retired researcher.  They were both in their early 70’s.  They were financially sophisticated and had the ability to pay cash for the second home.  They also had the income to qualify for a traditional mortgage and make monthly payments if they chose this route.  They did not have a mortgage on their current home.

Their financial position was as follows:

  1. Their primary home had a value of approximately $1,700,000. With no mortgage, their net equity position was $1,700,000.
  2. They both earned income from part-time employment and received social security income.
  3. They had substantial balances in both before tax and after-tax investment accounts.
  4. Their children were financially secure, so passing on wealth was not a priority. Living a fulfilling life in retirement and meeting their goals was the primary consideration.

At the time the homeowners contacted me they were leaning towards paying cash for the second home by withdrawing the funds from their taxable investment account.  The consequences of withdrawing $900,000 were two-fold:

  1. In order to withdraw the necessary cash from their investment account, they would need to sell investments. The sale of investments would have generated capital gain income and resulted in a tax liability for Federal and State income tax; and
  2. Once they withdrew the $900,000 they would no longer earn income or a return on the amount withdrawn from their account. While the funds would be invested in real estate which could appreciate, in the current environment their investment accounts generated substantially higher returns than owning real estate.

I showed them a different strategy that involved the use of a Reverse Mortgage.  The strategy I presented allowed them to use their current home to increase their net worth by managing their liquidity and tax situation.

First, they would not need to withdraw $900,000 from their investment account which means they would save a substantial amount of money by not having to pay federal and state income tax.  More importantly, they could leave their cash in their investment account earning income, growing and compounding.

The Reverse Mortgage also had the potential to give them access to a line of credit that would grow each year.  A little-known feature of a Reverse Mortgage line of credit is that the unused balance essentially earns interest each year and grows.  Lastly, with the Reverse Mortgage line of credit, payments on the amounts borrowed are optional for as long as they continue to live in the home.  The Reverse Mortgage option provided the homeowners control of how they managed their assets (including their home equity), income and liquidity.

After reviewing the alternatives and various scenarios, the homeowners decided the following:

  1. Obtain a Reverse Mortgage line of credit on their current home for approximately $550,000.
  2. Purchase the new home by withdrawing approximately $500,000 from the investment account and using approximately $400,000 from the Reverse Mortgage line of credit to purchase the second home.

After the obtaining the Reverse Mortgage, here are highlights of  the homeowners’ position:

  1. They were able to leave $400,000 in their investment account which continued to earn $40,000 to $60,000 per year. Over 5 or 6 years this would amount to $300,000 to $400,000, with compounding.  This exceeds the return they would have received from investing the $400,000 in the second home.
  2. They had access to a $150,000 line of credit that was available to draw upon at any time, never expired and could never be frozen. The line of credit provided an additional source of liquidity.
  3. The unused balance on the line of credit would grow each year at 5% or more, tied to the interest rate on the line of credit.
  4. They had the option to not make any payment for principal or interst on the outstanding mortgage balance or to pay principal, interest or both whenever they wanted. The option to make or not make a payment for principal and/or interest exists for as long as they live in home or until they pay the balance in full.
  5. They retain ownership of the home until they sell it.
  6. They retain all future appreciation on the home and the second home.
  7. Most importantly, the Reverse Mortgage allowed them to accomplish their objective to purchase the second home.

The Reverse Mortgage allowed them to use the equity in their home to accomplish very specific financial and lifestyle goals.  It also allowed their new worth to grow at a faster pace than it would have if they had paid cash for the second home.

The Federal Housing Finance Agency (FHFA) publishes a quarterly report called the House Price Index Quarterly Report. This report provides appreciation data on a state by state and by city-by-city basis.  This report presents hard data and goes beyond the anecdotal information reported in the media.  The highlights of this report are:

Housing prices increased in 44 states from the third quarter of 2024 through the third quarter of 2025, with the following states showing the highest annual appreciation (Illinois 6.9%, New York 6.8%, North Dakota 6.3%, New Jersey 5.9%, Connecticut 5.8%).

The following chart shows the appreciation by state over the past four years through September 30, 2025: FHFA Qtr 3 Map

The Housing Price Index provides price appreciation data for the past quarter, the past year and the past five-year period. The report also reports appreciation data from the first quarter of 1991 through the first quarter of 2025.

In the last 5 years the states with the highest appreciation are:

  1. Maine 72.59%
  2. Connecticut 64.34%
  3. New Hampshire 64.28%
  4. Rhode Island 72.47%
  5. New Jersey 63.87%

The states with the highest appreciation since 1991 are:

  1. Montana 631.08%
  2. Utah 616.77%
  3. Colorado 581.03%
  4. Idaho 538.67%
  5. Oregon 527.82%

For Colorado, price appreciation was -1.19% for the past four quarters. For the past five years, appreciation in Colorado was 34.23%. Since 1991 the appreciation in Colorado has been 581.03%, which is the third highest of any state in the country.

For the Denver Metro area, appreciation for the past year was 0.13%, and 30.93% for the past 5 years.  Since 1991 the appreciation in the Denver Metro area has been 626.34%, which is the second highest among the largest 100 metropolitan areas in the country.  Overall, housing prices rose in 76 of the largest 100 metropolitan areas over the past year.

There is a wealth of information in the report. For the full report CLICK HERE

 

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The Federal Housing Finance Agency (FHFA) publishes a quarterly report called the House Price Index Quarterly Report. This report provides appreciation data on a state by state and by city-by-city basis.  This report presents hard data and goes beyond the anecdotal information reported in the media.  The highlights of this report are:

Housing prices increased in 46 states from the second quarter of 2024 through the second quarter of 2025, with the following states showing the highest annual appreciation (New York 8%, Connecticut 7.8%, New Jersey 7.5%, Mississippi 7.3% and Illinois 6.7%).

The following chart shows the appreciation by state over the past four years through June 30, 2025: FHFA Qtr 2 Map

The Housing Price Index provides price appreciation data for the past quarter, the past year and the past five-year period. The report also reports appreciation data from the first quarter of 1991 through the first quarter of 2025.

In the last 5 years the states with the highest appreciation are:

  1. Maine 78.44%
  2. New Hampshire 73.47%
  3. Vermont 72.83%
  4. Rhode Island 72.47%
  5. New Jersey 72.05%

The states with the highest appreciation since 1991 are:

  1. Montana 623.69%
  2. Utah 621.39%
  3. Colorado 582.39%
  4. Idaho 541.65%
  5. Oregon 529.48%

For Colorado, price appreciation was -.61% for the past four quarters. For the past five years appreciation in Colorado was 39.92%. Since 1991 the appreciation in Colorado has been 582.39%, which is the third highest of any state in the country.

For the Denver Metro area, appreciation for the past year was -1.27%, for the past 5 years was 35.88%.  Since 1991 the appreciation in the Denver Metro area has been 620.01%, which is the second highest among the largest 100 metropolitan areas in the country.  Overall, housing prices rose in 81 of the largest 100 metropolitan areas over the past year.

There is a wealth of information in the report. For the full report CLICK HERE

 

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The Federal Housing Finance Agency (FHFA) publishes a quarterly report called the House Price Index Quarterly Report. This report provides data for housing appreciation on a state by state and city-by-city basis.  The report presents hard data and goes beyond the anecdotal information reported in the media.  The highlights of this report for the first quarter of 2025 are:

Housing prices increased in 49 states from the first quarter of 2024 through the first quarter of 2025, with the following states showing the highest annual appreciation (Rhode Island 11.4%, West Virginia 9.3%, Connecticut 9%, Ohio 7.6% and Wyoming 8.25%).

The following chart shows the appreciation by state over the past four quarters through March 31, 2025:

2025 First Qtr Map

The Housing Price Index provides price appreciation data for the past quarter, the past year and the past five-year period. The report also reports appreciation data from the first quarter of 1991 through the first quarter of 2025.

In the last 5 years the states with the highest appreciation are:

  1. Maine 79.92%
  2. Rhode Island 74.18%
  3. Connecticut 71.48%
  4. New Hampshire 71.47%
  5. North Carolina 69.8%

The states with the highest appreciation since 1991 are:

  1. Utah 629%
  2. Montana 626%
  3. Colorado 597%
  4. Idaho 540%
  5. Oregon 534%

For Colorado, price appreciation was 1.93% for the past four quarters. For the past five years appreciation in Colorado was 43.16%. Since 1991 the appreciation in Colorado has been 597.47%, which is the third highest of any state in the country.

For the Denver Metro area, appreciation for the past year was 1.69%, for the past 5 years was 40.13%.  Since 1991 the appreciation in the Denver Metro area has been 640%, which is the second highest among the largest 100 metropolitan areas in the country.  Overall, housing prices rose in 89 of the largest 100 metropolitan areas over the past year.

There is a wealth of information in the report. For the full report CLICK HERE