WHY A $52 MILLION MORTGAGE MIGHT HAVE BEEN A SMART MOVE FOR JAY AND BEY
I know what you’re thinking, Jay and Bey are together worth about a billion, I know they have $88 million to cash out a home. This very well may be the truth, but its not a smart financial move if you’re the businesspeople/investors that Jay and Bey are.
According to Business Insider, The Carters put 40% down and financed the remaining $52 million through the investment bank Goldman Sachs. It’s not uncommon for these “Jumbo Mortgages” to be done through these types of institutions.
Back to the original question though, why did they opt for a mortgage rather than paying for the house outright? The key word here is “Liquidity”, by not tying $88 million up in an asset thats not easy to liquidate, they are maintaining a healthy level of cashflow that can be used for other types of investments.
Business Insider reports that the couple put down 40% of the purchase price — $35.2 million — in cash and financed the mortgage through two separate trusts, public record shows. Their loan is a five-year adjustable-rate mortgage with an initial rate of 3.4%, meaning the rate will stay the same for the first five years and then adjust annually based on Libor, a benchmark rate used by the world’s leading banks. Until then, they’ll be making interest-only payments.
According to Robert Cohen, a managing director at Los Angeles based Carlyle Financial, the Carters most likely have a relationship with Goldman, allowing them to secure such a large loan. While these jumbo loans are risky, they present the opportunity for these institutions to manage the couple’s other assets as well. “Large financial institutions — Morgan Stanley, Goldman Sachs — are fighting for these types of clients to manage their money where they can have access to this opportunity” Cohen says.