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The lessons behind the stories of celebrities, mansions and mortgages

Do celebrities have mortgages? That’s a question on the minds of many prospecting American homeowners. The arduous and time-consuming process of getting a mortgage, and the even longer process of paying it off, is something most Americans assume is for the average joe on the street and not the Hollywood elite.

This assumption is easy to make when considering the type of mansions some celebrities live in and their respective neighborhoods. But how accurate is this assumption? More importantly, why do celebrities make the decisions they make about homeownership?

“The long list of celebrities who have mortgages on their properties is often surprising to people,” says Dallas-based mortgage lender Brian McCauley. “In fact, I’d bet most celebrities don’t shell out money for their properties.”

McCauley has over 15 years of experience in the mortgage industry, working as a mortgage planner and lender for some high profile individuals. He not only advocates for home ownership, but also for smart home ownership that brings financial freedom. He says there’s a lot to learn from how celebrities buy their homes.

Celebrities who have mortgages

In early 2020, the Duke and Duchess of Sussex, Prince Harry and Meghan Markle, arrived at their 9-bedroom mansion in Montecito, California after leaving the UK following their well-documented disagreement with the family. royal. Their Montecito mansion came with a price tag of $14.65 million but, perhaps more interestingly, a $9 million mortgage.

Now that we’ve established that the royal family has mortgages, let’s turn our attention to one of Hollywood’s richest celebrity couples. Jay Z and Beyonce. The billionaire couple are said to have taken out a $52 million mortgage on their sprawling $88 million Bel Air mansion. Chrissy Teigen and John Legend also admitted that they make payments on their home in California.

The pertinent question becomes, why don’t these celebrities just pay cash and be done with it? Surely Beyonce can afford to pay cash for a house…right?

Why Celebrities Use Mortgages

“Because it’s smart,” is McCauley’s short answer to this riddle. Why resort to a mortgage when you can afford to buy a house outright?

“For starters, not all celebrities can afford to pay 100% cash for the homes they want without running into financial trouble,” McCauley further explains, “Secondly, it’s rarely a good idea to paying for a house with cash is much better to use a leveraged investment strategy, where for example a person can pay 5 million dollars in cash for a 10 million dollar house, pay the balance with a mortgage and invest the $5 million held back in the stock market or other investments that pay off If the mortgage is a regular 3% mortgage, their investments can often return 5-10% returns, which means that they can refinance the mortgage with the investment and retain some profit margin.When you include the tax deductible benefits that can be obtained due to the presence of a mortgage, the case becomes in core more attractive.”

For many celebrities, liquidity is king. Rather than tying up large sums of money in mansions, celebrities are choosing to pay it back in small chunks over the next 30 years. By keeping more cash, they can take advantage of investment opportunities that arise.

Whether it’s buying a business, starting a business, investing in stocks, or buying into the Brooklyn Nets, celebrities often prefer to grow their money rather than tie it up.

In his role as a mortgage lender, McCauley’s main goal is to help people repair their credit, get the best loans for their situation, and become smart homeowners rather than just homeowners. “Home ownership can be a breeze or a huge burden, depending on how you go about it,” advises McCauley.

What We Can Learn From Hollywood’s Elite

Mortgages are not bad; this is probably the most obvious lesson of how celebrities run their homeownership business. However, one thing that celebrities must have is a qualified mortgage planner to help them make the right decisions. It goes without saying that if they need it, so do we.

Sort priority debts first

The average American on the street is struggling with some sort of debt; credit card debt, student loan debt or other personal debt. Taking out a mortgage can provide more cash to pay off these other debts.

Brian McCauley explains, “Student loans and credit card debt are higher priority debt. The reason mortgages have dramatically lower repayment percentages and a longer repayment term is that there is collateral attached. These other debts are unsecured and would often require more financial commitments.”

Chances are, anyone who can afford to buy a home doesn’t have an outstanding student loan. Still, even small decisions like paying a little more on the mortgage or paying it off faster can be a bad idea if other priority debts or lucrative investments are lurking that might have needed more money.

Invest your cash

It’s nearly impossible to name a celebrity who doesn’t have a business or two or isn’t invested in a business or franchise. Besides their day job, having a side business is the modus operandi of most celebrities. This mindset should also fuel how average Americans conduct their careers.

This mindset is particularly helpful in the homeownership journey. “If you invest wisely, your returns can pay your mortgage and you are effectively living debt-free, or at least without the common worries of being in debt,” says Brian McCauley.

The process of acquiring a mortgage is arduous and inflexible, but necessary for the average aspiring homeowner. The first key is to learn everything there is to learn about getting a mortgage the right way.

If Hollywood’s biggest have mortgages, there’s no reason not to consider the possibilities as well.

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