Super rich Americans like Mark Zuckerberg, Elon Musk, Jay-Z take out mortgages for homes they can easily afford — here’s why

Given that median annual wages were just under $60,000 during this year’s second quarter, it’s easy to see why the typical working American can barely afford a down payment on a home today, let alone the entire cost in one fell swoop.

But uber-wealthy folks are in a different position. Those with billions of dollars to their name can buy a home outright rather than take out a loan. Yet celebrities like Mark Zuckerberg, Elon Musk and Jay-Z have all made headlines for taking out multimillion-dollar mortgages — not out of necessity but to reap a couple of key benefits.

It allows for better cash flow

Someone who’s a billionaire a couple or several times over may not have to worry so much about cash flow. But borrowing for a home allows them to hang onto their cash for other purposes.

Remember, unlike stocks, which can be bought and sold in an instant, homes are a highly illiquid investment. So rather than tying up hundreds of thousands of dollars or more in a home, the wealthy might instead keep their money readily available and simply make payments they can easily afford on a loan.

Since mortgage interest is tax deductible on the first $750,000 of a loan, there’s still a nice tax write-off to be had on itemized tax returns while seizing the opportunity to make your money work harder for you in the meantime.

It frees up more money to invest

The average fixed mortgage rate as of October 10, 2024 is 6.32% for a 30-year loan. But during periods when borrowing rates are lower, it can make a lot of financial sense to finance a home, pay interest on a mortgage, and invest the money that mortgage frees up in stocks and other assets.