Here's Why Billionaires Like Elon Musk, Mark Zuckerberg Use Mortgages to Buy Mansions

Billionaires including Elon Musk and Mark Zuckerberg are increasingly opting for massive mortgages to finance their luxury estates rather than paying with cash. While the average person views debt as a financial trap, the ultra-wealthy use leverage as a sophisticated mechanism to keep their capital working.

By securing low-interest loans against their vast portfolios, tech moguls and celebrities avoid liquidating high-performing assets that drive their massive net worth. This strategy preserves their market positions in firms like Tesla and Meta while allowing them to expand their property holdings using the bank's money. It is a game of arbitrage where the growth of their investments consistently outpaces the cost of their debt.

Musk has reportedly taken out multiple mortgages, including $61 million from Morgan Stanley for five California properties. The mortgage amount is insignificant to his net worth of over $842 billion. Similarly, Zuckerberg also refinanced his Palo Alto home in 2012 with a 30-year, 1.05% adjustable-rate mortgage, according to a news outlet. The low rate means the mortgage cost him nearly nothing in interest payments.

Even Paris Hilton, who has a net worth of $300-$400 million, also took out a mortgage on a $63 million Beverly Hills compound she purchased from Mark Wahlberg. Hilton and her husband, Carter Reum, took the loan after buying the 12-bed, 20-bath home, which had a $43.75 million, 5.25% mortgage with JPMorgan.

'It surprises many people, but it's actually quite common for the mega-wealthy to take out mortgages—even when they could write a check for the full purchase price,' Maui Elite Property's Evan Harlow said.

Many experts believe taking out a mortgage instead of buying real estate with cash can be a wise financial decision. Most high-net-worth individuals have their wealth invested in stocks, bonds, and businesses, with not much liquid cash on hand.

'Ultra high-net-worth individuals think differently about liquidity and leverage,' said Compass director Miltiadis Kastanis. 'They'd rather keep their money working for them in investments, businesses—or even art—rather than tying it all up in one property.'

Kastanis explained that if billionaires think their investments will generate a higher return than the interest they pay on a mortgage, they would often opt to finance the property, adding that it is not much about the cost of the loan, but more about 'optimising where their money is placed.'

Major Tax Benefits of Mortgages

Mortgage holders can deduct up to a whopping $750,000 on interest payments only if they itemise while filing taxes.

'Mortgages also allow for tax optimisation in some jurisdictions, as interest payments may be deductible,' said Enness Global founder Islay Robinson. 'And in high-inflation environments, the value of money erodes over time, making it advantageous to borrow now and repay later.'

Many wealthy people take out loans backed by their investment portfolios, a practice known as securities-based lending. Clients often borrow against stocks or other assets without selling them to defer taxes and free up money for other opportunities.

The primary takeaway is that the ultra-wealthy do not fear debt; they manage it. They view their primary residence as a component of their overall investment portfolio rather than a static place to live. By prioritising flexibility and leverage, they ensure their money is always working as hard as possible, creating a cycle of growth that keeps their empires expanding.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.