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When you have a high net worth, you have access to financing that the “less wealthy” do not have. Since their net worth usually eclipses the loan amount, they are considered very low risk, so this is reflected in the interest rate they pay.
I don’t claim to have anywhere near the wealth of the people we are talking about in this thread, but I am financing a large life insurance policy at 2% because it makes a lot more sense than paying the large premium with money that would be earning a historical average of 6%.
In other words, I can have my product, while still earning an extra 4% on the money that would have been used to pay for the product.
Zuckerberg is the perfect example. Why would he tie up $100M in a property when he can take out a loan at 1% while that $100M could be earning a lot more money, minus the 1%?
Yes, of course.
If you're worth $150m it doesn't means that you have $30m in cash or even liquid assets laying around. And even if you did, you might not want to tie it up in a house. Most wealthy people got their wealth by leveraging capital so they are more naturally oriented toward financing large purchases. And this is one of the reasons that wealthy people often quickly lose everything when their luck turns - they have a large amount of debt that is not unhealthy in good times but quickly can become unmanageable when fortunes waver. It's nonsense to think that people pay cash for homes just because their total worth exceeds the cost of the house.
If you're worth $150m it doesn't means that you have $30m in cash or even liquid assets laying around. And even if you did, you might not want to tie it up in a house. Most wealthy people got their wealth by leveraging capital so they are more naturally oriented toward financing large purchases. And this is one of the reasons that wealthy people often quickly lose everything when their luck turns - they have a large amount of debt that is not unhealthy in good times but quickly can become unmanageable when fortunes waver. It's nonsense to think that people pay cash for homes just because their total worth exceeds the cost of the house.
True. But these people you are talking about, are over leveraged. You will not get these very low interest rates if you are over leveraged.
My very low interest rate is based on a letter of credit that is under 10% of my net worth, so the creditors (in this case, bond holders), know their investment is safe under even the worst conditions.
Umm, because his net worth is somewhere around $70B?
I can’t read the article because I don’t turn off my ad blockers. But income is not the only way to qualify for a loan.
That $70 billion is theoretical wealth. If the Zuck tried to cash out of his entire Facebook stock holding, the price would collapse to zero.
Banks are eager to write mortgages for trophy properties. With so few manufacturing industries left (which banks traditionally lent to), M&A and real estate (property development) are banks' real bread and butter.
If you have $20 million, $30 million or $40 million, you wouldn't have to ask.
Since you don't have $20 million, $30 million or $40 million, the answer wouldn't help you.
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