Since founding Facebook, Mark Zuckerberg has joined the 1 percent in more ways than one.
According to SF Gate, Zuckerberg has refinanced a $5.95 million mortgage on his Palo Alto home with a 30-year adjustable-rate loan starting at 1.05 percent.
How would anyone receive an interest rate that low? Greg McBride, senior financial analyst with Bankrate Inc., a company which tracks interest rates, explained to SF Gate that interest rates can be lower if the person is willing to bear the risk of monthly interest rate adjustments.
"When you can borrow at a rate below inflation, you're borrowing for free. This is the concept of using other people's money and it preserves financial flexibility for the borrower."
While interest rates are at record lows, Zuckerberg's 1.05 percent is well below average. The average rate on a one-year adjustable mortgage was 2.69 percent on July 12, up from a record low 2.68 percent a week earlier, according to Bloomberg.
What kind of billionaire would take out a mortgage? A smart one. According to Time Magazine, financial observers speculate that the only reason Zuckerberg took a mortgage at all is that if the "hoodie-sporting mogul" can borrow at a mere 1.05 percent, he can invest the money he hasn't spent on buying the house in assets with a higher return than 1.05 percent.
McBride told the Christian Science Monitor, “When you can borrow for free, there’s no sense in tying up your own money, when you can use that money for more profitable things.”
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