The Lessons Behind The Stories Of Celebrities, Mansions, And Mortgages

Do celebrities have mortgages? This is one question on the mind of many prospecting American homeowners. The strenuous and lengthy process of securing a mortgage, and the even more protracted process of paying it off, is something that most Americans assume is for the average joe on the street and not for the Hollywood elite.

This assumption is easy to make when considering the kind 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 regarding homeownership?

"The extensive list of celebrities that have mortgages on their properties is often surprising to people," Says Dallas-based mortgage lender Brian McCauley. "Actually, I would be willing to wager that most celebrities don't shell out cash 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 advocates not just for homeownership but also for smart ownership that brings financial freedom. He asserts that there is much to be learnt 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 in their 9-bedroom mansion in Montecito, California, after leaving the U.K. in the wake of their well-documented disagreement with the royal family. Their Montecito mansion came with a $14.65 million price tag but, perhaps more interestingly, a $9 million mortgage.

Now that we have established that royals have mortgages let's turn our attention to one of Hollywoods's wealthiest celebrity couples; Jay Z and Beyonce. The billionaire couple was reported to have taken out a $52 million mortgage on their sprawling $88 million Bel Air mansion. Chrissy Teigen and John Legend have also admitted that they make payments on their California home.

The pertinent question becomes, why do these celebrities not just pay cash and get it over with? Surely Beyonce can afford to pay cash for a house...right?

Why celebrities use mortgages

"Because it is smart", is McCauley's short response to this puzzle. Why use a mortgage when you can afford to buy a house outrightly?

"For starters not all celebrities can afford to pay 100% cash for the houses they want without running into some financial problems," McCauley explains further, "Secondly, it is rarely a good idea to pay for a home in cash, it is way better to use a leveraged investment strategy. Where for instance, a person can pay $5 million in cash for a $10 million house, and pay the balance with a mortgage and invest the $5 million withheld in the stock market or other investments that yield returns. If the mortgage is a regular 3% mortgage, their investments can often bring 5-10% in returns, which means that they can refinance the mortgage with the investment and retain some margin of profit. When you include the tax-deductible benefits that can be gotten because of the presence of a mortgage, the deal becomes even more attractive."

For many celebrities, liquidity is king. Rather than tying up vast amounts of money in mansions, celebrities choose to pay it off in little chunks over the next 30 years. By retaining more liquidity, they can take advantage of investment opportunities that present themselves.

Whether buying a business, starting a business, investing in stocks, or buying into the Brooklyn Nets, celebrities often prefer growing their money and not tying it down.

In his role as a mortgage lender, McCauley's primary focus is helping people fix their credit, get the best loans tailored to their circumstances, and become smart homeowners rather than just homeowners. "Homeownership can be a breeze or a tremendous burden, depending on how you go about it," McCauley advises.

What we can learn from Hollywood's elite

Mortgages are not bad; that is probably the most obvious takeaway from how celebrities go about their business of homeownership. However, one thing that celebrities compulsorily have is a qualified mortgage planner to help them make the right decisions. It goes without saying that if they need one, we probably do too.

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 debts. Taking out a mortgage can allow for more liquidity to settle these other debts.

Brian McCauley explains, "Student loans and credit card debt are higher priority debts. The reason mortgages have considerably lower repayment percentages and a longer time span to pay off is because there is collateral attached. These other debts do not have any collateral and would often require more financial commitments."

The chances are that anyone who can afford to buy a house outrightly may not have any outstanding student loans. Still, even little decisions like paying a little extra on the mortgage or paying it off faster may be a bad idea if other priority debts or lucrative investments are lurking around that could have required that money more.

Invest your liquidity

It is almost impossible to cite a celebrity who does not have a business or two or is not invested in some business or franchise. Besides their day job, having a side hustle is the modus operandi for most celebrities. This mindset should fuel how average Americans go about their careers as well.

This mindset is particularly helpful in the journey of homeownership. "If you invest wisely, your returns can pay for your mortgage, and you effectively live without any debt, or at least without the common concerns of being in debt," explains Brian McCauley.

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

If Hollywood's greatest have mortgages, there is no reason why we shouldn't consider the possibilities also.