He's worth how much and has an ARM? What a moron.

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He's worth how much and has an ARM? mortgage What a moron.

fixed it for ya

Wow, read the article folks before you start criticizing. His interest rate adjusts monthly (following rates). It will stay around 1% probably for the foreseeable future thanks to the low rates. It looks like a smart move, and is only available to "high net worth" individuals. At any moment he could pay his house off cash, but why pay cash for a house when your interest is under the inflation rate.

Regardless of inflation, why would you pay interest if you have the cash? Sounds like that game where you drive all over town looking for the lowest gas price to save a cent or two when you end up burning more gas than the money saved.

because its free money... 1% is less than CPI, plus he has the liquidity to call in at any time.. smart move.

No...he's a douche.

So he borrows 1M and it costs him 1% (10K) and earns .5% (5K) for that 1M in savings account for a net loss of 5K a year.

5K for that type of money doesn't seem like much to keep liquid

*HE DOESN'T NEED THE MONEY*

OMFG.

why would he put into a savings account.. he could borrow 1 million and use to spend.. or invest..

Oh yes Las

borrow to spend— that is the rule these days

he can invest in Treasuries for 1.4%

I suppose just because you have a lot of money you are more apt to make riskier investments though— RIGHT?


Ok— then he can buy Condos in Irvine — a nice illiquid investment in a deflationary environment

or maybe he feels lucky and wants to buy 2005-2006 MBS

who knows?

but just think of all that YEILD he would be missing out on by buying his home for cash and owning it outright instead of renting it from the bank

Zillow not showing the love on Irvine condo prices:
http://www.zillow.com/local-info/CA-Irvi....

Vegas nails it...thanks.

Why the **** would he waste his time filling out the application?

Looks good to me after tax....... and if QExx diminishes the $$ purchasing power, then he ends up an even cheaper loan.

In the unlikely event that I'm ever worth 11 figures- I'm pretty sure I won't give a micro**** about the interest rate on my 7 figure mortgage.

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why would you pay interest if you have the cash?

Because he is being lent money at 1.0% and he can invest it at a much higher return.

This is what all the wives of Wall Street bankers have been doing with TARP funds.

The rich and well connected get free money and work the spread.

You seem to be ignoring this thing called "risk"....

Risk is the lifeblood of free enterprise (except for Elite bankers where it is heads they win and tails we loose)

If you were filthy rich had some spare time would you choose to bang the latest cooze who offered herself up, or go sit with a mortgage lender? He couldn't even make the IPO road trip ceremony, you think he's got time for a mortgage goon?

Priorities people, priorities.

(Unless the two were the same woman)

if your dollar is worth 100 cents today and next year its only worth 97 cents. You loose 3 cents. If your borrow 100% at 1% you only loose 2 cents.. why is that soo hard to grasp..

Laswyguy, perhaps people prefer to own assets, rather than owe debt

and if your dont pay your property tax.. what happens to your so called asset.

He has the option to jingle mail it back to the bank so they can take the loss if the value falls out of the house. If he buys it outright then he takes the risk of the full value of the loss if he ever wants to leave... at least to a point. California is non-recourse.

Though, with the amount of money he has I would think this is a waste of time to even care about...

Seems like Jinxx nails it FTW. If you have so much $$$ that the credit rating game just doesn't apply (I think the Sugarman is in this category), then the jinglemail option is always right there on the table. Play it till no bank will lend to you, then just pay cash and get the discount which that affords.
Sugarman says: "What? FICO??? Pfffft. Who needs it."