Being wealthy means never having to think about making mortgage payments ever again, right?
Well, it turns out even the rich and famous use a little financing, sometimes. The only difference is that for them, it’s a choice.
Taking out a mortgage can be a smart financial move, even if you have the cash to buy a home outright. And that’s doubly true today, when mortgage rates are at all-time lows — with 30-year fixed-rate loans averaging just 2.72%.
The examples of a few celebrity borrowers show how home loans can help the rich get richer. You also might use a home loan to build wealth.
Mortgages of the rich and famous
Think your mortgage payments are high? Just imagine how much celebrities are paying for loans on their mansions.
Check out these familiar names:
Meghan Markle and Prince Harry
You may have already heard that Meghan and the prince landed in a $14.6 million home in Santa Barbara, California. But did you hear the former royals obtained a $9 million mortgage for their new digs? So says Variety.
If they got a 30-year loan like us commoners, we’re talking monthly payments approaching $50,000.
Beyoncé and Jay Z
This musical duo is known to borrow tens of millions of dollars for luxury home purchases.
Public records show the couple financing their $88 million mansion in Bel-Air with a $52.8 million mortgage from Goldman Sachs, The Wall Street Journal reports.
Chrissy Teigen and John Legend
After selling their previous pad, the model and musician recently upsized to a Beverly Hills haunt for $17.5 million.
But the famous couple is likely still taking the mortgage route. Last winter, Teigen confirmed on Twitter she and her husband were indeed making payments on their California home.
Of course, you always want to make your monthly mortgage payments, even if you’re a famous celebrity.
Sheen sold his Beverly Hills mansion for a big loss, two years after facing foreclosure for reportedly owing more than $80,000 in back mortgage payments.
The actor was forced to lower the asking price five times before it finally sold, People reports.
Why take out a mortgage when you have the cash?
Well-to-do actors, musicians and sports stars often have the cash on hand to match just about any asking price. So why pay all that interest if you don’t have to?
Simply put, borrowing money for a home allows you to use your cash for other things. The Hollywood lifestyle has many demands, after all, and those designer clothes and sports cars aren’t cheap.
Savvy celebs, however, use more of their available millions to invest. The expected returns on many types of investments can be much greater than the interest paid on a mortgage, especially when mortgage rates are as low as they are right now.
So if Beyoncé and Jay Z are paying an initial fixed rate of 3.4%, as The Wall Street Journal suggests, the Crazy In Love couple would come out ahead by putting their money in a mutual fund that earns even 4% a year.
Can ordinary people use the same strategy?
The same thinking works just fine for regular folks, though you’ll probably be investing with hundreds or maybe thousands, rather than millions. But you can also wind up with more spending money, maybe for your online holiday shopping.
Now may be a better time than ever before. Although it might be tempting to wait to see whether mortgage rates drop even lower, trying to “time the market” can cost you. Rates climbed gently following the news that an effective coronavirus vaccine could soon be in reach.
Low rates can also help current homeowners: If you refinance now, you could slash your monthly payments substantially and invest the difference.
Some 18.5 million mortgage holders are in a good position to refi and save around $300 monthly, the data firm Black Knight said last week. Good refinance candidates include those with solid credit scores and at least 20% equity in their homes.
You’ll land the best rate by shopping around; borrowers who get five rate quotes save an average of $3,000 more than those who get just one quote, a Freddie Mac study found.
Once you’ve pocketed a nice discount, you can take your cues from Hollywood borrowers and invest some of those savings. Make it simple with the help of a robo-advisor, or take a crack at some no-fee investing on your own.
- Kanye West Responds To Drake’s Diss On “Circo Loco” - 6 November 2022
- Kim Kardashian Puts Blame On Kanye West For Polarizing Balenciaga Outfit - 6 November 2022
- Drake Seems To Confirm $500M Record Deal With Universal - 6 November 2022