Ah, the lifestyles of the rich and famous. You might think that star singers and celebrities own all of their properties outright, but you’d be wrong.
Instead, Jennifer Lawrence, Beyonce, Jay-Z and High Net Worth Individuals (HNWIs) are increasingly snapping up real estate with the help of mortgages. This might seem a strange idea as they are millionaires and billionaires, but there are often logical reasons behind it. Some do it to keep their money available for other investments; others, to ensure that if their contract is cancelled, they have the funds available to keep themselves afloat.
In this article, we will investigate why celebrities look at mortgages and remortgages as a savvy financial move.
The music world is fickle at best. She who is in favour one week can be out of favour the next. In an ever-changing and highly competitive industry, even the most popular artists can see demand for their music drop. It’s this uncertainty and unpredictability that drives some to look to mortgages. While these concerns may not apply to the biggest names in the industry, they are very real for less established acts.
Cash, collateral and equity
Instead of tying up large chunks of capital in property, many celebrities opt for a mortgage. This also allows them to break down the cost of having their dream home into monthly payments. This is a strategic move that gives control of outgoings while avoiding the high cost of renting luxury properties.
Having a mortgage or remortgaging a property owned outright can also free up money that can be invested elsewhere. Often stocks and bonds are the preferred investments as they offer a better return on cash than real estate does.
Another point to consider is that many VIPs don’t keep much of their net worth in cash, rather it is invested in things like cars, jewellery, yachts, and similar. These items that don’t generate income can be used as collateral instead, something that isn’t offered to regular customers.
Should things not go to plan career-wise, the individual can continue with manageable monthly payments, consider remortgaging, and reap the benefits of capital invested in other markets. Then, as their career progresses, they can decide whether to pay off the mortgage or continue until the end of the term.
Ability to remortgage
Remortgaging offers homeowners the ability to benefit from better rates elsewhere, therefore, saving money overall. After all, being a billionaire doesn’t mean they don’t need to be savvy with a good deal! Regular individuals, celebrities, musicians and HNWIs consider remortgaging as a way to save money.
This can be achieved by paying off the loan quicker or enjoying lower rates. In terms of releasing equity, this can be very valuable in challenging times. Furthermore, it allows the individual to keep the property and to benefit from its value.
Remortgaging is a big decision but it’s good practice to review the deal you are getting, periodically. While some seek out the knowledge of a private mortgage advisor, others instead opt for browsing remortgage deals on sites such as Trussle. Visitors to the free service can find useful information including how to save money, which provider has the best rates, and advice on fees, the process and remortgaging for different reasons.
Volatile property market
The global property market is passing through a challenging time, and 2020 is expected to be an uncertain year. Prices have been going up and down, leaving investors unsure as to whether they will make a profit or a loss. Because of this, a number of musicians, celebrities and HNWIs are opting for mortgages.
This can help them navigate a range of uncertainties, without risking too much. For example, if they put all their money into a property and the value decreases significantly, it is a big blow. However with a mortgage, if the value goes up, there is a profit to be made.
Rather than tying up millions in bricks and mortar, a mortgage offers VIPs and HNWIs a range of financial benefits. Smart asset management, the ability to free up equity and enjoy better rates, and safeguarding against market volatility are just some of the reasons these individuals are increasingly seeking out home financing.