Lessons from celebrity stories, mansions and mortgages

    Do celebrities have mortgages? This is a question on the minds of many potential American homeowners. The arduous and lengthy process of securing a mortgage, and the time-consuming process to pay it off, is something most Americans assume is for the average street-goer rather than the Hollywood elite.

    It’s easy to make this assumption when considering the kind of mansions that some celebrities and their neighborhoods live in. But how accurate is this assumption? More importantly, why do celebrities make the decisions they make about home ownership?

    “The extensive list of celebrities who have mortgages on their property is often surprising to people,” says Brian McCauley, a Dallas-based mortgage lender. “In fact, I’d be willing to bet that most celebrities don’t pay money for their property.”

    McCauley has over 15 years of experience in the mortgage industry having worked as a mortgage planner and lender to some of the prominent individuals. It advocates not only home ownership but also smart ownership that brings financial freedom. He stresses that there is 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 nine-bedroom mansion in Montecito, California, after leaving the UK in the wake of their well-documented feud with the royal family. Their Montecito mansion came in at $14.65 million, but perhaps the most interesting was their $9 million mortgage.

    Now that we’ve established that members of the royal family have mortgages, let’s turn our attention to one of the richest couples in Hollywood; Jay-Z and Beyonce. The billionaire couple reportedly took out a $52 million mortgage on their sprawling $88 million Bel Air mansion. Chrissy Teigen and John Legend also have He confessed They make payments in their California home.

    The relevant question becomes, why don’t these celebrities just pay the money and get rid of it? Beyoncé can definitely pay cash to buy a house… right?

    Why do celebrities use mortgages?

    “Because she’s smart,” McCauley’s short response to this conundrum. Why use a mortgage when you can buy an entire house?

    McCauley further explains, “For starters, not all celebrities can afford to pay 100% cash for the homes they want without running into some financial troubles.” Second, paying for a home in cash is rarely a good idea, and it’s a better way to use a leveraged investment strategy. For example, a person could pay $5 million in cash for a $10 million home, pay the balance with a mortgage and invest $5 million retained in the stock market or other return-producing investment. If the mortgage is a regular 3% mortgage, their investments can yield 5-10% returns, which means they can refinance the mortgage through investing and keep some profit margin. And when you include the tax-free benefits that can be obtained from having a mortgage, the deal becomes more attractive.”

    For many celebrities, liquidity is king. Instead of locking huge sums of money into mansions, celebrities choose to pay it off in small portions over the next 30 years. By retaining more liquidity, they can take advantage of investment opportunities that present themselves.

    Whether you’re buying a company, starting a business, investing in stocks, or buying into Brooklyn Nets, celebrities often prefer to grow their money rather than limit it.

    In his role as a mortgage lender, McCauley’s primary focus is on helping people fix their loans, get the best loans tailored to their circumstances, and become smart homeowners rather than just homeowners. “Home ownership can be a breeze or an enormous burden, depending on how you do it,” McCauley advises.

    What we can learn from Hollywood’s elite

    Mortgages are not bad. This is perhaps the most obvious conclusion from how celebrities do their home ownership business. However, one of the mandatory things that celebrities have is a qualified mortgage planner to help them make the right decisions. Needless to say, if they needed one, we might as well need it.

    sort out priority debts first

    The average American on the street is saddled with some kind of debt. Credit card debt, student loan debt, or other personal debt. Getting a mortgage can allow more liquidity to settle these other debts.

    Brian McCauley explains, “Student loans and credit card debt are higher priority debt. The reason mortgages have much lower repayment rates and a longer repayment period is because there are collateral attached. These other debts have no collateral and often require more commitments. Finance”.

    Anyone who is able to purchase a home outright will likely not have any outstanding student loans. However, even small decisions like paying a little extra on the mortgage or paying it off faster may be a bad idea if there are other priority debts or profitable investments that may require more money.

    Invest your cash

    It is almost impossible to cite a celebrity who does not have a business or two or does not invest in some business or franchise. Besides their daily work, having a side hustle is the way to work for most celebrities. This mindset should feed the way average Americans go about their careers, too.

    This mindset is especially useful on the home ownership journey. “If you invest wisely, your returns can pay off your mortgage, and you’ll virtually live without any debt, or at least without the shared fears of being in debt,” explains Brian McCauley.

    The process of obtaining a mortgage loan is arduous and rigid 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 greatest has ever had mortgages, there’s no reason why we can’t consider the possibilities either.