In fact, the average millionaire pays off their house in just 10.2 years. But even though you're dead set on ditching your mortgage ahead of schedule, you probably have one major question on your mind: How do I pay off my mortgage faster?
Those with billions of dollars to their name can buy a home outright rather than take out a loan. Yet celebrities like Mark Zuckerberg, Elon Musk and Jay-Z have all made headlines for taking out multimillion-dollar mortgages — not out of necessity but to reap a couple of key benefits.
Some rich people use a mortgage to buy homes and some pay all cash, the same as everyone else. The choice just depends on the situation. Sometimes, there's more advantage to take on a mortgage to avoid tying up too much cash on a property and sometimes, it's a better deal with all cash.
"Shark Tank" investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
Paying off your mortgage early frees up that future money for other uses. Your mortgage rate is higher than the rate of risk-free returns: Paying off a debt that charges interest can be like earning a risk-free return equivalent to that interest rate.
By the time you reach your 40s, you'll want to have around three times your annual salary saved for retirement. By age 50, you'll want to have around six times your salary saved.
Others will object to taxing the wealthy unless they actually use their gains, but many of the wealthiest actually do use their gains through the borrowing loophole: They get rich, borrow against those gains, consume the borrowing, and do not pay any tax.
A groundbreaking 20-year study conducted by wealth consultancy, The Williams Group, involved over 3,200 families and found that seven in 10 families tend to lose their fortune by the second generation, while nine in 10 lose it by the third generation. However, there are ways to be at the odds.
According to the Visual Capitalist, the ultra wealthy invest 32% of their average proportion of total wealth in primary and secondary homes which is the largest share among other assets, followed by equities (18%) and commercial property (14%). That's 3.7 homes per UHNWI, on average.
A homeowner is considered house-rich, cash-poor when they have wealth tied to their home but lack readily available cash to meet their everyday living expenses. Being cash-poor can result from a myriad of factors, such as unexpected expenses, debt, budgeting issues, medical concerns, or reduced income.
But even the world's wealthiest, like Elon Musk, Mark Zuckerberg and Jay-Z, have taken out mortgages for their homes. It's not because they must, but because it makes good financial sense.
While it might not always happen as quickly as you like, your home will eventually sell. You just need a strong strategy, a healthy dose of patience, and, let's face it, a bit of good luck.
He goes on to say: “Paying off your mortgage early seems impossible but it is completely doable and people do it all the time, but how can you do it and why would you want to put in the extra effort? Paying off your mortgage early will rev up your wealth building.”
Studies indicate that millionaires may have, on average, as much as 25% of their money in cash. This is to offset any market downturns and to have cash available as insurance for their portfolios.
40% of Americans Pay Off Their House — Are They Doing Better Financially? For most Americans, a home mortgage is the biggest financial obligation they will ever have. A traditional mortgage spans 30 years and is often in the hundreds of thousands of dollars, so the interest charges can be enormous.
The average millionaire in the United States is actually 61 years old.
By prioritizing frugality, old money families are able to allocate more of their resources towards savings and investments, which compound over time to grow their wealth.
According to Schwab's Modern Wealth Survey, Americans now believe you need a net worth of about $2.2 million to be considered rich. This number dropped slightly from 2020, when people thought $2.6 million was the magic number.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC's Millionaire Survey , that portion was about 24% in 2023.
They focus on income generation
The richest people don't only invest for growth, but they also invest to generate more income. They diversify their investments and find new streams of income. They know how to turn their assets into income-generating machines, therefore achieving wealth, even if the economy takes a dip.
If a millionaire doesn't budget properly and starts spending on personal chefs, expensive cars, and other luxury amenities, they may quickly run out of money. Sometimes millionaires, especially new millionaires, feel they have so much money that they lose perspective on what they can afford.
If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.
Peak earning years are generally thought to be late 40s to late 50s*. The latest figures show women's peak between ages 35 and 54, men between 45 and 64. After that, most people's incomes typically level off. Promotions favor younger people with longer futures*.
If you retire with no money, you'll have to consider ways to create income to pay for your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.