With the average home price near $504,000 and the average annual income hovering around $80,000, most people need to take out a mortgage to make homeownership a reality. However, there’s a small percentage of the population who can afford to purchase a house in cash, but still choose to take out a home loan.
We’ll share some stories of the ultra-rich borrowing funds to purchase property and explain why wealthy individuals might use this financial strategy. Then, we’ll offer some ways you can buy a house without a mortgage — even if you’re not in the top 1%.
Why wealthy buyers take out mortgages
These independently wealthy household names have borrowed to purchase or refinance a residence within the past 15 years:
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- In 2018, Elon Musk took out more than $60 million in mortgages across multiple properties, despite having a fortune greater than $23 billion.
- In 2017, Beyoncé and Jay-Z took out a $53 million mortgage on a $88 million mansion, while having a net worth of more than $1.5 billion.
- In 2012, Mark Zuckerberg refinanced his home even though his net worth exceeded $15 billion.
While they could have used cash to complete these real estate transactions, they chose to keep their money in the bank (or invested in other assets).
When borrowing makes sense, even for the rich
There are several reasons why you might want to take out a mortgage even if paying for a home in cash is an option, including:
- Your money earns a higher interest rate than your home loan charges. The average 30-year fixed mortgage interest rate is 6.75%. The average annual return of the S&P 500 index from 1928 to 2024 is 8%.
- You have a lot of valuable assets, but they’re not liquid. People who own real estate or businesses can be very wealthy, but they can’t tap into that nest egg without selling some assets, which they may not want to do. Elon Musk falls into this category.
- You want to keep the cash available for other purposes. Money in the bank gives you options. You can invest, pay for once-in-a-lifetime opportunities or handle emergencies without incurring debt (unless you want to).
- You want to take advantage of the tax breaks. If you itemize your deductions, you can write off the mortgage interest you pay on your income taxes. You’ll also have more money available to invest in tax-advantaged accounts, like a 401(k), individual retirement account (IRA) or health savings account (HSA), further reducing your tax liability.
- You appreciate the flexibility your home loan offers. If interest rates drop, you can refinance your mortgage to save money. You can also pay off your house early if desired.
People who borrow strategically understand that there’s a difference between good debt and bad debt. Good debt helps you purchase an appreciating asset, such as a home or an education linked to a profitable career.
Bad debt finances a depreciating asset (or no asset), such as a car or a vacation, and often carries a high interest rate.
How to buy a house without a mortgage
While there’s nothing wrong with responsibly leveraging debt, there’s also nothing wrong with wanting to avoid it altogether. Even though you likely don’t have a nine-figure net worth, there may be some ways you can buy a home with cash, such as:
- Delaying your home purchase. If you have time on your side, consider consistently stashing money in a high-yield savings account (HYSA) or brokerage account, allowing it to grow over the years or decades. Once you have sufficient funds, withdraw the necessary amount to buy your dream property.
- Asking for help. Your family may be willing and able to chip in toward your house fund. You might also receive an inheritance that covers some or all of the purchase price.
- Borrowing from yourself. You may be able to borrow up to 50% of your 401(k) balance to put toward your home purchase. However, those funds will miss out on the benefit of compound interest until they’re repaid. Additionally, failing to repay the loan can result in financial penalties and tax implications.
You may need to cobble together a plan that includes all of these options (and perhaps other strategies), but living in a mortgage-free home offers one perk that the alternative strategy can’t boast: debt freedom.
related content
-
December Fed Meeting: Live Updates and CommentaryThe December Fed meeting is one of the last key economic events of 2025, with Wall Street closely watching what Chair Powell & Co. will do about interest rates.
-
This Is Why Investors Shouldn't Romanticize BitcoinInvestors should treat bitcoin as the high-risk asset it is. A look at the data indicates a small portfolio allocation for most investors would be the safest.
-
I'm a Federal Benefits Pro: I Answer These 2 Questions a LotMany federal employees ask about rolling a TSP into an IRA and parsing options for survivor benefits, both especially critical topics.
-
How Much Would a $50,000 HELOC Cost Per Month?Thinking about tapping your home’s equity? Here’s what a $50,000 HELOC might cost you each month based on current rates.
-
Should You Tap Your Home Equity Before 2026?As borrowing rates and tax law shifts converge, here's what homeowners need to know before pulling equity out of their home.
-
11 Cities With the Cheapest Groceries in the USIf you live in one of these 11 cities, you're paying less than the rest of the country to keep your fridge stocked.
-
My $1.2 Million Vacation Home Has a $360K Mortgage. I Don't Need My Upcoming $45K RMD. Should I Use It to Pay Down the Mortgage?We asked wealth planners for advice.
-
5 Simple Fixes to Save on Heat Bills This WinterWith fuel prices expected to rise 10% or more this winter, making your home more energy efficient will really pay off.
-
5 Charming Small Towns Where America's Wealthy RetireDiscover 5 small communities in the U.S. for affluent retirees — where charm outweighs the cost.
-
I'm a Real Estate Investing Pro: This High-Performance Investment Vehicle Can Move Your Wealth Up a GearLeave online real estate investing to the beginners. Accredited investors who want real growth need the wealth-building potential of Delaware statutory trusts.
-
Retire in the Hamptons: Finding the Right Town for Your BudgetYes, it's favored by the rich and famous, but retiring in the Hamptons may not be out of your league. Here's a guide to affordability and and who is happiest living there.
