The Federal Reserve published a blog post early in November. Would it surprise you to know that the top 1% hold almost 5% of total personal debt in America? That’s over $700 Billion in mortgage debt in the U.S. alone, estimate another $70 Billion for Canada and you’ve got a pretty impressive number.

But what are the rich using mortgage for?

And why would the rich need to borrow money?

In the Luxury Home Mortgage Advisor course, we dedicate an entire module to what we call “Intelligent Debt”. The concept is simple: when mortgage proceeds are invested (stocks, bonds, real estate), mortgage interest is tax deductible. And the 1% pay higher marginal tax rates, so deductions are a bigger deal for wealthier households. No one likes to pay taxes, even if it means paying interest on a mortgage loan.

The poorest households hold less mortgage debt, but they hold more than their share of consumer debt. The bottom half of households hold almost 54% of consumer debt according to the Federal Reserve. Consumer debt includes credit cards, student loans and car loans.

By comparison, the 1% seem to borrow only to fund tax-advantaged, appreciating assets. And over the long run, housing prices increase in value.

Poorer households, on the other hand, rely on debt to pay for post-high school education and transportation, while carrying credit-card balances. Unlike housing, cars aren’t an appreciating asset.

So, the rich don’t fund consumption with debt, and they don’t borrow to buy depreciating assets. These 2 prudent lessons can be used to create a targeted campaign to attract high-net-worth-clients. The math is simple: come up with strategic ways to attract high-net-worth-clients and then offer them ways to create generational wealth, while minimizing taxes.

I’d be happy to discuss some of the strategies we teach to do exactly this.

Book a call with me directly: