It’s easy to think that once someone reaches billionaire status, they can just buy whatever they want with cash—especially something as basic as a house. But even the world’s richest people, like Elon Musk, Mark Zuckerberg, and Jay-Z, have mortgages on their homes. Not because they have to, but because it makes financial sense.
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According to data from the Federal Reserve, the average U.S. home price has skyrocketed in recent years – from around $288,000 in 2014 to more than $412,000 in 2024. With the median annual salary just under $60,000 this year, it’s no wonder people struggle to scrape together enough money for a down payment, let alone the full cost of a home.
But here’s where it gets interesting. If you have billions, like Musk or Zuckerberg, you can buy a house without blinking an eye. However, these moguls choose to take out loans instead of putting money on the table. Why? It’s all about smart money management.
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First, taking out a mortgage helps you keep cash on hand. Cash flow isn’t an issue for people like Musk, but it’s still a useful tool. Think about it: Houses are what’s called “illiquid.” Unlike stocks, which can be sold in seconds, houses take time to sell.
Rather than stashing millions in a house, the ultra-rich prefer to keep their money accessible, ready for new investments or business opportunities. They can easily pay their mortgages while their liquid assets remain free for more profitable uses.
As financial planner Matt Wilson said, “Mortgages allow wealthy individuals to be more flexible with their money. They can take advantage of better investment opportunities by not having a large portion of it tied up in one place.”
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According to financial experts, there’s another nice perk: tax deductions. In the U.S., mortgage interest is deductible for loans up to $750,000. This means billionaires can still claim a deduction on their tax return. While it may seem like small change to them, it’s still money saved.
Another reason is the return on investment. Currently, the average mortgage rate hovers around 6.2%. Historically, rates have been even lower. The stock market, on the other hand, has an average return of 10% per year. Even if the actual return is closer to 7%, that is still better than what a mortgage costs.
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Think about it: why spend $500,000 on a house right away when you can take out a mortgage, invest that same $500,000 in stocks and potentially earn an 8% return? You’ll end up with more money in the long run. It’s like killing two birds with one stone.
As financial expert Sarah Newman explains, “Why pay off a mortgage when you can invest that money and get a higher return? It’s all about making your money work harder.”
For example, Jay-Z mortgaged his $88 million Bel-Air estate. He could have written a check, but he took out a loan. Why? Probably because the freed-up cash could be used to invest in more ventures like art, tech, or startups, all of which can yield much higher returns over time.
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This article Elon Musk, Mark Zuckerberg, Jay-Z Take Out Mortgages Despite Their Billion-Dollar Fortunes – Here’s Why the Ultra-Rich Borrow Originally appeared on Benzinga.com
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