The richest people on the planet could buy any home outright and never think twice about the cost. So why do they take out mortgages instead? The answer reveals a financial philosophy that turns conventional thinking upside down — and contains lessons that apply far beyond the billionaire bracket.
Contents
- The counterintuitive truth about billionaire borrowing
- Real-world examples: Musk, Zuckerberg, Beyoncé and Paris Hilton
- Reason 1: Liquidity preservation
- Reason 2: Tax efficiency
- Reason 3: The “buy, borrow, die” strategy
- How securities-based lending works
- The risks — even for the ultra-wealthy
- What ordinary investors can learn from this
The counterintuitive truth about billionaire borrowing
When most people take out a mortgage, it is because they cannot afford to buy the property any other way. For billionaires, the calculation is entirely different. Borrowing is not a necessity — it is a deliberate strategic choice driven by the mathematics of opportunity cost, tax law, and capital efficiency.
The core insight is straightforward: if you can borrow money at 5% and invest the same capital at 12%, you come out ahead every time you borrow instead of spend. Multiply that logic across hundreds of millions of dollars, and the compounding advantage becomes enormous. For the ultra-wealthy, a mortgage is not a debt burden — it is a financial instrument.
Real-world examples: Musk, Zuckerberg, Beyoncé and Paris Hilton
These are not hypothetical scenarios. Some of the most recognisable names in global wealth have made exactly this choice — and the public mortgage records make their reasoning visible.
Elon Musk
World’s richest person
$61M
Musk took out mortgages totalling $61 million across five California properties, all arranged through Morgan Stanley’s private banking division. Against a net worth measured in the hundreds of billions, this sum is negligible — but the decision to borrow rather than pay cash was entirely intentional.
Mark Zuckerberg
Meta founder and CEO
1.05%
Zuckerberg secured a 30-year adjustable-rate mortgage at just 1.05% on his Palo Alto home during the ultralow interest rate environment of the early 2010s. At that rate, the cost of borrowing was virtually negligible — leaving his capital free to generate far superior returns elsewhere.
Beyoncé & Jay-Z
Combined net worth ~$4 billion
$110.6M
The couple hold approximately $110.6 million in combined mortgage debt on a single property — a figure representing less than 3% of their total wealth. The most recent mortgage, from Morgan Stanley’s private bank, carried a 5% fixed rate for the first ten years on a 30-year term.
Paris Hilton
Net worth est. $300M–$400M
$43.75M
After purchasing a $63 million Beverly Hills mansion, Hilton took a $43.75 million mortgage with JPMorgan Chase at 5.25% — financing more than two-thirds of the purchase price despite having a net worth many times the cost of the property.
What all four cases share: none of these individuals needed to borrow. Each chose to borrow as the financially superior option — keeping their capital working in investments rather than locked inside a single piece of real estate.
Reason 1: Liquidity preservation
The single most important driver of billionaire real estate financing is the preservation of liquid capital. Despite their extraordinary wealth, most ultra-high-net-worth individuals do not hold large sums of cash sitting idle. Their net worth is concentrated in company equity, stock portfolios, investment funds, and business assets — resources that are powerful precisely because they are actively generating returns.
Paying $50 million in cash for a property means withdrawing $50 million from investments, selling stock and triggering taxes, or disrupting carefully constructed financial positions. Taking a mortgage instead means none of that happens. The property is acquired, and the $50 million stays invested.
“Ultrahigh-net-worth individuals think differently about liquidity and leverage. They’d rather keep their money working for them in investments, businesses — or even art — rather than tying it all up in one property.”— Miltiadis Kastanis, Executive Director of Sales, Compass, via Fortune
This is the concept of opportunity cost applied at scale. Every dollar tied up in a home is a dollar that is no longer compounding in a stock portfolio, private equity fund, or business venture. For someone whose investments routinely generate double-digit annual returns, the cost of paying cash for property is not zero — it is the return they sacrificed by doing so.
Reason 2: Tax efficiency
Beyond liquidity, the tax dimensions of mortgage borrowing create a second layer of advantage that is invisible to most ordinary homebuyers but central to how wealthy individuals structure their finances.
Mortgage interest deductibility
Under US tax law, mortgage interest is deductible for loans up to $750,000 for taxpayers who itemise their deductions. While this cap limits the deduction’s value on a $50 million mortgage, it still reduces the effective cost of borrowing for qualifying portions of the debt. More importantly, the interest paid on a mortgage reduces taxable income in the year it is paid — a consistent annual benefit that compounds in value over a multi-decade loan.
Avoiding capital gains on sale of investments
For a billionaire to pay cash for a property, they typically need to sell assets. Selling appreciated stock, for example, triggers a capital gains tax event — at the federal level, long-term gains are taxed at up to 20%, with an additional 3.8% net investment income tax applying to high earners. In a state like California, total combined capital gains tax can approach 40% on a large sale. Borrowing instead means no assets are sold, no tax is triggered, and the investments continue compounding untouched.
- Federal long-term cap gains rate (top), 20%
- Net investment income tax, 3.8%
- CA state cap gains rate, up to 13.3%
- Mortgage interest deduction cap, $750K loan
Reason 3: The “buy, borrow, die” strategy
The most sophisticated layer of billionaire real estate financing sits within a broader wealth management framework that tax academics and financial planners have come to call “buy, borrow, die.” The strategy was formally articulated by Professor Edward McCaffery in the 1990s, though the underlying mechanics have been used by wealthy families for generations.
- Buy appreciating assets — real estate, company stock, private equity — and hold them without selling. As long as assets are not sold, no capital gains tax is owed, regardless of how much they have increased in value. These unrealised gains accumulate tax-free year after year.
- Borrow against the value of those assets to fund spending, property purchases, or other acquisitions. Under US tax law, borrowed money is not treated as income — it is debt, not a taxable event. This creates a mechanism to access wealth without paying tax on it.
- Die — and pass the assets to heirs. Under current US estate law, inherited assets receive what is known as a “stepped-up cost basis,” meaning the cost basis is reset to the asset’s market value at the time of death. Any capital gains that accumulated during the original owner’s lifetime are effectively erased for tax purposes. The heirs inherit both the assets and the advantageous tax position.
Policymakers and tax reform advocates have increasingly targeted the “buy, borrow, die” strategy. The Yale Budget Lab has estimated that targeted reforms could generate between $102 billion and $147 billion in additional federal revenue over ten years. Whether such reforms pass remains a live political debate.
How securities-based lending works
While mortgages use the property itself as collateral, billionaires frequently access a parallel tool: securities-based lending (SBL), which uses investment portfolios as collateral for cash loans. Rather than selling stocks to raise cash, a borrower pledges their portfolio to a bank — typically receiving between 50% and 70% of the portfolio’s market value as a loan, at interest rates significantly below what retail borrowers would pay.
Securities-based loan
- Collateral: stock portfolio
- No assets sold — no tax event
- Investments keep compounding
- Rates typically below standard mortgages
- Loan proceeds not treated as income
Selling assets instead
- Capital gains tax immediately due
- Loss of future compounding on sold assets
- Potential state tax on top of federal
- Disrupts long-term portfolio allocation
- Proceeds are free and clear, but taxed
Morgan Stanley’s wealth management division reported that its clients held over $68 billion in non-mortgage securities-based loans — a figure that had doubled over the preceding decade. The scale of this practice illustrates just how central it has become to how the ultra-wealthy manage their finances.
The risks — even for the ultra-wealthy
The strategy is not without genuine risks, even for those with substantial cushions. Understanding the downsides is essential to evaluating whether leverage is an appropriate tool at any level of wealth.
Margin calls
If asset values fall sharply, lenders can require immediate repayment or additional collateral — potentially forcing a sale of assets at the worst possible time.
Rising interest rates
Zuckerberg’s 1.05% rate was only possible in an era of historic low rates. At today’s 6%+ mortgage rates, the arithmetic of borrowing vs. investing is less favourable.
Legislative risk
Tax law is not permanent. Reforms targeting the stepped-up basis or securities-based lending could change the calculus of the “buy, borrow, die” strategy substantially.
Concentration risk
Borrowing against a concentrated position in a single stock amplifies losses if that stock falls — a real risk for founder-executives whose wealth is tied to one company.
What ordinary investors can learn from this
The billionaire mortgage playbook is built on principles that are not exclusive to the ultra-wealthy — they are simply applied at a different scale. The underlying logic is accessible to anyone with appreciating assets and a long investment horizon.
- Think about opportunity cost. Paying off a low-interest mortgage aggressively may feel prudent, but it is only optimal if your mortgage rate exceeds the return you could earn by investing that capital instead.
- Borrow for appreciating assets, not depreciating ones. The strategy works because property and investment portfolios tend to grow in value. Borrowing to fund lifestyle spending does not carry the same logic.
- Understand the tax advantages of your mortgage. If you itemise deductions, mortgage interest reduces your taxable income — a benefit worth calculating explicitly rather than ignoring.
- Don’t over-leverage. Wealth managers generally advise borrowing no more than 25% of a portfolio’s value via securities-based lending to maintain sufficient buffer against market downturns.
The decision to borrow or pay cash always comes down to one question: can my capital generate a better return elsewhere than the interest rate I am being charged? If yes, borrowing is mathematically superior. If not, paying cash makes more sense.
This article is for informational purposes only and does not constitute financial or tax advice. Consult a qualified financial adviser before making investment or borrowing decisions.
