Mortgage rates have been at record lows in recent weeks, but for Mark Zuckerberg, the founder and CEO of Facebook, mortgage rates have been even sweeter.
Zuckerberg recently refinanced a $5.95 million loan for his Palo Alto, Calif., home and landed a 1.05 percent mortgage rate, Bloomberg reports. Zuckerberg refinanced his loan into an adjustable-rate mortgage.
ARMs usually offer low teaser rates for a period of time before they rise. These loans were blamed on being a big culprit of a soaring number of home owners who defaulted on their mortgages when their payments reset to higher amounts following the housing boom. Often times, when home owners opt to refinance they refinance out of ARMs and into a fixed-rate mortgage, which offers some security of never-fluctuating monthly payments.
But Zuckerberg, one of the wealthiest people in the country, likely can afford to take on the risk of an ARM.
ARMs currently carry about a 2.7 percent one-year lock-in rate, on average. Zuckerberg was able to get his rate even lower by agreeing to accept monthly resets of his interest rate, with no lock-in period, from the beginning of his loan. So his payments could fluctuate right away.
But â€œunlike most home owners, [Zuckerberg] can simply sell assets and pay off his mortgage loan if the interest rate on his loan suddenly skyrockets,â€ notes AOL Real Estate. â€œDespite Zuckerberg's cheap rate, trying to follow in his footsteps isn't a smart idea for most home owners. Refinancing to a fixed-rate mortgage will help you lock in affordable, predictable payments no matter what happens to interest rates in the future.â€
Source: â€œFacebook CEO Mark Zuckerberg Refinances Mortgage Loan Down to 1%,â€ AOL Real Estate (July 16, 2012)