For many people, the only way to afford a home is to finance it with a mortgage and pay off that loan over time. This especially holds true today given how home prices have increased through the years.
During the second quarter of 2014, the median U.S. home sale price was 288,000, according to Federal Reserve data. Ten years later by the second quarter of 2024, that number climbed to $412,300.
Don’t miss
Car insurance premiums in America are through the roof — and only getting worse. But 5 minutes could have you paying as little as $29/month
Don’t leave your family unprotected — find life insurance coverage up to $2 million with no medical exam or blood test
Lock in juicy quarterly income through this $1B private real estate fund — even if you’re not a millionaire. Here’s how to get started with as little as $10
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.
Read more: These 5 magic money moves will boost you up America’s net worth ladder in 2024 — and you can complete each step within minutes. Here’s how
It frees up more money to invest
The average fixed mortgage rate as of September 13, 2024 is 6.20% 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.
The stock market’s historical average annual return, for example, is about 10%. But that return isn’t guaranteed, and for investors with average stock-related knowledge, it may be more realistic to plan on a 7% or 8% annual return over time.
Right now, there’s not such a big gap between the average 30-year mortgage rate and a reasonable investment return in the stock market. But when mortgage rates are averaging 4% or 5%, it can be more beneficial to put a minimal amount of money into a home and invest the rest. For example, it’s better to pay 5% interest on a $500,000 mortgage if that $500,000 is able to earn 8% or more in a stock portfolio while you pay the loan off slowly.
It’s easy to see why people who can afford to pay cash for homes sign mortgages instead. But even if you’re not raking in seven or eight figures, you can enjoy the same benefits of taking out a mortgage — increased cash flow, a tax deduction on interest, and the ability to put the rest of your money to work in the stock market.
News
Leo’s real job in Love Is Blind is revealed after admitting his biggest insecurity is being used for money
Every season of the hit Netflix series has to have that kind of man. Love Is Blind is known for bringing in interesting people from all walks of life on their show, and season 7’s Leo is no exception. All eyes were on Leo during his time in The…
Love is Blind’s Leo and Brittany reveal why they called off their engagement
Love Is Blind stars Leo Baudy and Brittany Wisniewski shared the reason why they broke up shortly after getting engaged in the pods on season seven of the Netflix series. Love was blind short-lived for Leo Baudy and Brittany Wisniewski. The Love Is Blind stars—who got engaged during season…
Emily In Paris 4: The price Lily Collins charges for each episode has been revealed
The second half of Emily in Paris Season 4 is about to be released, and fans are excited, the first part of Season 4, which premiered on August 15, 2024 Los Angeles: The hit Netflix series Emily in Paris first came…
The emotions of the Menendez brothers when watching a Netflix movie are that unpredictable
Lyle and Erik Menendez are speaking out from prison, claiming they were sexually abused by their music executive father The jailhouse calls, some 20 hours worth, came in 15-minute increments from the Richard J. Donovan Correctional Facility in San Diego,…
The latest updates on Lyle and Erik Menendezs’ murder case that the Netflix shows about them miss out
Netflix has released a true crime drama and a documentary about the Menendez brothers’ high-profile ’90s trial. But both projects leave out two new pieces of evidence that were made public in 2023. The brothers hope to use the evidence…
Adam Brody reveals why he let 9-year-old daughter Arlo watch The Ring: ‘I would never push this’
The actor shares Arlo and a 4-year-old son whose name has not yet been revealed with his wife Leighton Meester Adam Brody and his daughter Arlo love watching movies together, and the father-daughter duo recently ventured into a new genre. On Wednesday, Oct….
End of content
No more pages to load