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Why the Super-Wealthy are Choosing to Get Mortgages

November 23, 2016

 

Mortgages aren’t normally associated with wealthy people. When the mega-rich – such as Brad Pitt or Mark Zuckerberg – buy a home, people assume they buy their homes outright because they definitely have enough money in the bank to do it. But there are some surprising benefits for wealthy individuals to take out a mortgage.

“Financing your home allows an individual to take a big tax deduction.”

Although some people might be wealthy right now, they could be in a profession where their income drops drastically or goes away altogether at any time. This is particularly true for professional athletes. Aaron Rodgers, quarterback for the Green Bay Packers, took out a $1 million mortgage on his $2 million home, despite having a $110 million contract, according to MarketWatch. Professional athletes can suffer career-ending injuries in any game during the season, so financing a big investment such as a house will allow them to keep more cash on hand, the source reported. 

But that’s not the only reason to opt for a mortgage. Financing your home allows an individual to take a big tax deduction while he or she is paying off the loan, according to Go Banking Rates. Homeowners are able to use their mortgage interest and property taxes to get a deduction when they do their taxes. Mortgage interest deductions saved taxpayers $75 billion in the 2015 fiscal year, according to Go Banking Rates.

Even Zuckerberg – whose net worth is valued at more than $56 billion – took out a mortgage for a home he bought in 2012. At that time, he opted for an adjustable-rate mortgage that started out below the rate of inflation, essentially allowing the Facebook founder to borrow money for free, according to The Christian Science Monitor. If his interest rate was to rise substantially, wealthy people such as Zuckerberg are capable of buying their homes outright, saving them money and giving them peace of mind.

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