One of the things that millionaires buy for fun is luxury homes. Some rich people can afford to pay for a home in cash but a majority of them opt to take a home loan anyway. There are benefits they enjoy by getting a mortgage loan like low-interest rates for those with good credit scores. In this post, we are going to answer this question, do millionaires pay off their houses?
Do Rich People Have Mortgages?
Yes. While many people take home mortgages because they cannot afford to pay cash for their houses, millionaires often get home loans because they get to enjoy some benefits. Getting a mortgage makes more financial sense for millionaires unlike paying cash for their homes.
Do Millionaires Pay Off their Mortgage?
Yes. A majority of millionaires prefer to buy their houses using mortgages even though they can afford to pay cash. Why is it so? Let’s jump into it right away.
1. Low-Interest Rates
A majority of millionaires have good credit scores and they easily qualify for loans. With good credit scores, they can get loans at favorable terms. This helps them get a mortgage loan at a low interest rate. And as a result, instead of paying cash for their house, they get a mortgage. This helps them to own a home without using their money while they invest their money in high-income-generating investments.
It makes economic sense for them to get mortgage loans since their investments generate more income than the interest they are paying for their home mortgages. Consequently, they can continue investing and reap enough to pay off their mortgages.
2. Mortgage Interest Deduction
Another reason why millionaires prefer to pay off their mortgages is that they can claim a mortgage interest deduction. This helps them reduce their taxable income. In most cases, the mortgage interest deduction claim is usually higher than the home mortgage interest. As such, if you are in the highest tax bracket, you could save a lot of money by claiming a mortgage interest deduction.
What Age Do Most People Pay Off their Mortgage?
A survey conducted showed that a majority of people pay off their mortgage at the age of 59. It would be best to pay off your mortgage before retirement so that by the time you retire, you are debt free.
How Long Does it Take Millionaires to Pay Off their House?
It takes the average millionaire 10.2 years to pay off their home loan. Although a majority of millionaires can afford to pay off their mortgages early, it makes economic sense not to pay off their mortgages early. It is because they will lose benefits like mortgage interest deductions if they pay off their houses early. As such, they prefer to continue paying off their mortgage over time.
Also read: Do millionaires have debts?
How Long Does it Take the Average Person to Pay off their Mortgage?
While a typical mortgage has a lifespan of 10 years or below, it takes the average person 30 years to pay their mortgage. It is because the common mortgage term is 30 years.
Summary of if Millionaires Pay Off their Houses
Many millionaires prefer to get home loans even if they can afford to pay cash for their homes. And since they usually have good credit scores, they can easily qualify for a loan. The reason they prefer to get a mortgage is that they enjoy lots of benefits like mortgage interest deduction and low-interest rates.