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.