But this type of arrangement isn’t as rare as it may seem, real-estate experts say.
“It surprises many people, but it’s actually quite common for the mega-wealthy to take out mortgages—even when they could write a check for the full purchase price,” Evan Harlow, real-estate agent at Maui Elite Property, told Fortune.
“The takeaway for the average buyer isn’t to mimic their precise approach, but to understand the principle,” Harlow said. “Sometimes the smartest financial move isn’t paying everything off, but keeping your money flexible and working for you.”
While it may seem counterintuitive to take out a mortgage in today’s market, where rates are still hovering in the 6% range, it can actually be a savvy move for ultra-high net worth individuals.
“Ultra-high-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,” said Kastanis, who has represented high-profile celebrities in real-estate transactions.
In other words, using a mortgage helps to free up capital for higher-yield investments or business ventures, according to Harlow. He used the example of one of his clients who owns a successful tech business who recently purchased a $3 million property and decided on a jumbo loan. The client didn’t have to do that, but he wanted to keep his cash in the market where his portfolio, over the long-term, was turning in annualized returns well over the mortgage rate.
“For him, buying a house with cash sounded like ‘just parking money in the driveway,’ as opposed to putting it to work,” Harlow said.
Both Harlow and Kastanis also said ultra-high net worth individuals see mortgages differently from other people. People like Hilton view it more as a tool instead of a burden.
“For many wealthy buyers, a mortgage is just another lever they can pull in their overall wealth strategy,” Kastanis said. “They’re playing chess, not checkers.”
