Mark Zuckerberg Has a 1% Interest Rate Mortgage, and That Should Be Concerning

One of the most popular truisms in economics is that there is no such thing as a free lunch. When one person gets something for free than ultimately someone else pays a price. Public records show that Mark Zuckerberg, the founder of Facebook is paying 1.05% interest on a mortgage of $5.95 million.  Meanwhile, the average price most other Americans are currently paying to refinance with a similar adjustable rate mortgage is about 3%, or roughly the current rate of inflation.

With a net worth of over $14 billion dollars, the obvious question to ask is why does Mr. Zuckerberg bother to take out a mortgage at all? Why would someone this rich want to pay interest on debt? The answer: Facebook’s Chief Executive must be actually making more money than he is losing off of this arrangement. Through a generous federal tax deduction for interest paid on home mortgages, and because of the ongoing decline in the value of the dollar, Mark Zuckerberg actually saves more of his wealth by paying a mortgage than by actually owning his own property.

If Mark Zuckerberg has figured out how to become wealthier by living in a mansion, who is paying the cost of this extravagance? According to my calculations, the U.S. public is missing out on $21,800.00 per year in income taxes alone. However, the larger loss to all of us comes in the form of inflation, as each dollar we have can buy less goods and services than the year before. For the last several years the quasi-private U.S. Federal Reserve has had a policy to create enough money so that large financial institutions can always borrow money at 0.25% interest. Compare this to the standard cost of a graduate student loan, 6.8%, and suddenly the playing field for Americans of average means does seem oddly skewed.

From a lending standpoint, it makes sense to loan money at lower rates to individuals and institutions with a greater capacity to pay back the loan. In this way, banks are great at decreasing their risk of defaults. The challenge from a societal standpoint, is that the financial system has become a tool that rewards those who already have wealth much more than it helps the majority of Americans achieve their financial and career ambitions. The younger generations are so bogged down with student loan debt and mortgages that starting a small business or even a family is often out of financial reach.

The U.S. financial system is in need of reform. The division between people who create real value for society--doctors, craftsmen, teachers, entrepreneurs, etc.--and those who make huge amounts of money--owners of capital, financiers, and a few entrepreneurs like Zuckerberg--is rapidly growing. I am concerned that this is a moral issue. At the heart of any well-functioning economy is the principle that a person is entitled to the fruits of their labor. At this point, I don’t know of any easy answers, so I humbly invite your advice.

Meanwhile back in Palo Alto, California, everything appears to be going just fine. Homes in Zuckerberg’s ZIP code, 94301, sold for a median $1.875 million, or $968 a square foot, in June, up 1.7%from a year earlier, according to Bloomberg News. The five-bedroom, 5-1/2-bath house that Zuckerberg refinanced was built in 1903 on a 9,011 square-foot lot. The two-floor, white wood-sided home sits behind a gated drive and a wall of groomed shrubbery within a three mile drive of Stanford University and Facebook’s Menlo Park headquarters. Zuckerberg was married to Priscilla Chan in the backyard on May 19. He declined to comment on his 1.05% adjustable rate mortgage.

How much do you trust the information in this article?

Cory Suter

Ph.D. Student in Economics at Temple University, and Founder of Direct Congress, Cory is passionate about making Congress work for America, instead of being led by special interest money. Prior to his formal study of Economics, he spent five years building two small businesses into successful enterprises in Philadelphia, PA. Cory grew up in a low-income conservative Christian family in Virginia, and attended The Honor Academy in Texas before studying business at JMU and working for Teach For America. He is married to a Children's Doctor, and has one son Jonathan, who was born in June of 2012.

MORE FROM

‘New York Times’ interview sparks latest wave of GOP frustration with Trump

The President’s “disturbing” comments on Jeff Sessions and Special Counsel Robert Mueller drew sharp rebukes from his own party.

Jordan Edwards’ mother speaks out after Monday’s indictment of the officer who killed her son

“We will not allow Jordan’s death to be another statistic.”

Trump keeps saying he wants to “let Obamacare fail.” How would that happen?

There are several ways the administration could sabotage the law, experts said.

AIDS deaths are almost half of what they were in 2005 — but experts worry Trump could reverse that

Trump's proposed budget cuts could be detrimental for those living with HIV.

OJ Simpson granted parole after nine years in prison

After serving nine years in prison for a 2007 armed robbery, OJ Simpson was granted parole in a unanimous vote on Thursday.

Black Lives Matter activists respond to the police shooting of Justine Damond

“Some white people don’t feel the tragedy until one of them is murdered.”

‘New York Times’ interview sparks latest wave of GOP frustration with Trump

The President’s “disturbing” comments on Jeff Sessions and Special Counsel Robert Mueller drew sharp rebukes from his own party.

Jordan Edwards’ mother speaks out after Monday’s indictment of the officer who killed her son

“We will not allow Jordan’s death to be another statistic.”

Trump keeps saying he wants to “let Obamacare fail.” How would that happen?

There are several ways the administration could sabotage the law, experts said.

AIDS deaths are almost half of what they were in 2005 — but experts worry Trump could reverse that

Trump's proposed budget cuts could be detrimental for those living with HIV.

OJ Simpson granted parole after nine years in prison

After serving nine years in prison for a 2007 armed robbery, OJ Simpson was granted parole in a unanimous vote on Thursday.

Black Lives Matter activists respond to the police shooting of Justine Damond

“Some white people don’t feel the tragedy until one of them is murdered.”