My first question is how come the 40th richest man in the World needs a mortgage home loan in the first place?
My second question is why is his mortgage interest rate so low? The answer to the first question may be that he is paper money rich?
Many of super rich count money that is not fold-able, see-able or actualized yet. An example is shares that have never been bought or sold. That money has never been realized. Its in assets that can be converted into money. Its like the TV program Deal or No Deal. Until you take the deal, its just a number on the board.Or maybe that he can do better than 1.05% by investing that money instead.
If someone worth over $15 billion needs to make money on his money, then is that just plain greedy? He probably wants that money to be free and maybe even wants to know what's it like to have a mortgage like normal people.So did Mark Zuckerberg get such a low rate?
Here's my take.1. Its a no risk loan. Every time your bank makes a loan it has to factor in risk that makes up part of the mortgage interest rate.
In Australia that's a low risk, because less than 2% have any default, and less than 1% go into serious default.
So lending to one of the Richest men in the World, who's fortunes are still on the rise, is a no-brainer.
2. Scarcity. The loan is secured against his home in Palo Alto. Homes there were never affected by the GFC. High tech still boomed, and even average homes there go for over a million, so the security is likely to appreciate.
3. Prestige. Everybody in the World knows who Mark Zuckerberg is. And its not a common name.
Question. Name anybody who is the 20th to the 50th Richest persons in the World. Off the top of your head that would be hard. But even if you Googled and found the list, would you actually know any of them? They don't have the pulling power of Mark Zuckerberg do they?
The point is that the bank gets a great great boost of this publicity by the prestige of the customer. Its called name-dropper.
You might be thinking. Maybe I too can score a low interest rate mortgage, just like Mark Zuckerberg. You would probably be wrong. But you do see the value of having a high profile customer and a low rate, right?4. Where does Mark Zuckerberg stash all his lose change?
Maybe in the same bank that holds his mortgage? I think so. If I were his bank I might be tempted to give him a 0% interest free mortgage, just as a stunt. That would make even bigger news. Don't forget, one percent of $6 million is only $60,000 a year, so hardly a big deal in the scheme of advertising these days. So whilst Mark Zuckerberg's mortgage interest rate deal may be an example of the rich getting richer, the fact is that this is a no risk deal for the bank, and an opportunity to get "free" publicity for his bank. His bank is assured a return regardless of what the housing market in the US does. Can you say the same for your home, your income prospects and your advertising pulling power?
Source: Rick Adlam, Home Mate
