Billionaire real estate financing often defies conventional wisdom: Elon Musk, the world’s richest person, took out $61 million in mortgages on five California properties through Morgan Stanley, while Mark Zuckerberg locked in a 30-year mortgage at 1.05% on his Palo Alto home. Rather than paying cash outright, these ultra-wealthy individuals use mortgages as a strategic wealth tool.
The primary reason billionaires borrow for real estate is to preserve liquidity. Most of their wealth sits in investments, stocks, and business assets rather than cash accounts. By taking a mortgage, they keep capital deployed in higher-returning investments instead of tying millions into a single property. “Ultrahigh-net-worth individuals think differently about liquidity and leverage,” Miltiadis Kastanis, executive director of sales at Compass, told Fortune. “They’d rather keep their money working for them in investments, businesses—or even art—rather than tying it all up in one property.”
Tax efficiency amplifies this advantage. Mortgage interest is tax deductible for loans up to $750,000 for those who itemize deductions. When Zuckerberg secured his 1.05% mortgage during the era of ultralow interest rates in the 2010s, the borrowing cost was negligible while his capital remained free to generate returns elsewhere. If investment returns exceed the mortgage rate, financing the property mathematically outperforms paying cash.
Wealthy individuals also exploit securities-based lending, which allows them to borrow against stock portfolios without selling and triggering capital gains taxes. This practice, often called “buy, borrow, die,” lets billionaires access cash for spending or acquisitions while their investments continue compounding and eventually pass to heirs with a stepped-up cost basis that largely eliminates accumulated capital gains taxes. Borrowed money itself is not treated as taxable income under U.S. law, creating a tax-efficient funding mechanism unavailable to ordinary borrowers.
The strategy extends beyond real estate. Paris Hilton, worth an estimated $300 million to $400 million, took out a $43.75 million mortgage with JPMorgan Chase at 5.25% after purchasing a $63 million mansion in Beverly Hills—demonstrating that even celebrities worth hundreds of millions find borrowing advantageous. For billionaires and everyday buyers alike, the decision hinges on whether locking capital into a home makes financial sense or whether that money could work harder elsewhere.
Sources
- Fortune — Reported Musk’s $61 million in mortgages on five California properties, Zuckerberg’s 1.05% Palo Alto mortgage, and expert analysis on tax and liquidity benefits of billionaire borrowing.
- Los Angeles Times — Confirmed Musk’s mortgages across five California properties through Morgan Stanley.
- CNBC — Documented Zuckerberg’s 1.05% 30-year adjustable-rate mortgage on his Palo Alto home in 2012.