What kind of billionaire would take out a mortgage? When it comes to Facebook founder Mark Zuckerberg, the answer is easy: a smart one with a financial plan.
Despite being worth an estimated US$16bn, Zuckerberg has refinanced a US$5.95m mortgage on his Palo Alto home with a 30-year adjustable-rate loan starting at 1.05%, reported Time magazine.
Bloomberg reported the average rate on a one-year adjustable mortgage was 2.69% at the time of Mr Zuckerberg’s residential purchase. So just how did he receive an interest rate that low?
According to the San Francisco Gate, interest rates can be lower if the person is willing to bear the risk of monthly interest rate adjustments – something that in this case is perhaps not so much of a risk.
So while we know how, the question remains: why?
It is, of course, another of Zuckerberg’s calculated moves. As the initial interest rate is far below the US inflation rate, Mr Zuckerberg can take the money he would have spent on the house and invest it elsewhere.
He is, in essence, borrowing for free.