Billionaires Elon Musk and Mark Zuckerberg used mortgages to buy multimillion-dollar mansions. Here’s why that’s a savvy financial decision TSLA
+0.49% Even the world’s most affluent people sometimes need a mortgage.
Elon Musk is the world’s richest man, on track to become the first-ever trillionaire, but he’s done one thing most average Americans have to do: take out a mortgage.
The Tesla CEO has taken out several mega mortgages, including $61 million from Morgan Stanley, on five properties in California, according to the Los Angeles Times. That’s barely a drop in the bucket of his now $662 billion net worth, so it could be difficult to understand why he’d borrow tens of millions of dollars to buy real estateOne of the main reasons is that most of the wealth held by UHNW people is tied up in investments, stocks, and bonds, and they don’t keep as much liquid cash on hand.
“Ultrahigh-net-worth individuals think differently about liquidity and leverage,” Miltiadis Kastanis, executive director of sales at Compass, told Fortune. “They’d rather keep their money working for them in investments, businesses—or even art—rather than tying it all up in one property.”
Meta CEO Mark Zuckerberg, the world’s fifth-richest man, has also used mortgages to his advantage. In 2012, Zuckerberg refinanced his Palo Alto home with a 30-year, 1.05% adjustable-rate mortgage, according to CNBC. With such a low rate, the mortgage cost him practically nothing, so it didn’t make sense to have nearly $6 million tied up in a home. Plus, borrowing during the era of ultralow interest rates in the 2010s was especially attractive. Many wealthy buyers locked in mortgages at a much lower rate than today’s.If they believe their investments will yield a greater return than the interest they’re paying on a mortgage, it makes more sense to finance the property,” Kastanis added. “It’s less about the cost of the loan itself and more about optimizing where their money is placed.”
Mortgage interest can also be tax deductible on loans up to $750,000 for those who itemize when filing their taxes. While Zuckerberg’s mortgage was more than that, he can likely deduct at least part of his mortgage interest, which further reduces borrowing costs.
“Mortgages also allow for tax optimization in some jurisdictions, as interest payments may be deductible,” Islay Robinson, founder and CEO of mortgage brokerage Enness Global, told Fortune. “And in high-inflation environments, the value of money erodes over time, making it advantageous to borrow now and repay later.”Billionaire Meta CEO Mark Zuckerberg’s latest move into South Florida real estate is causing a stir.
On Monday, The Wall Street Journal reported that Zuckerberg and his wife, Priscilla Chan, are purchasing a new waterfront mansion on Miami’s ultra-exclusive Indian Creek (1). While the price of the off-market deal hasn’t been disclosed, local real estate agents estimate the property could be worth between $150 million and $200 million
