SmartMoney Blogs

Real-Time Advice
Our real-time advice on how market shifts and news impact you and your money

Adjustable Mortgage: Right for Zuckerberg, Wrong for You


Mark Zuckerberg uses an adjustable-rate mortgage. Should you? Probably not.

When the billionaire Facebook founder refinanced his mortgage with First Republic Bank earlier this year, he scored an adjustable-rate loan that started with a 1.05% rate in May, according to Bloomberg. The rate resets monthly and is equal to the London Interbank Offered Rate, or Libor, plus 0.8 percentage points. The one-month Libor rate was recently 0.25%.

By one measure, the loan is so cheap that Mr. Zuckerberg is making money on it. The inflation rate was 1.7% over the year through May, according to the Labor Department. That’s a modest rate by historical standards, but nonetheless, it’s high enough to suggest that the dollars Mr. Zuckerberg owes are losing value faster than his loan is accruing interest.

A one-month adjustable-rate mortgage is a niche product available only to the wealthy, says Greg McBride, a senior financial analyst at But one-year ARMs are common enough that rates for them are tracked by mortgage specialist Freddie Mac. The latest rate is 2.69% — safely above the inflation rate.

So how did Mr. Zuckerberg score such a low rate? By posing near-zero credit risk. First Republic currently pays little to attract deposits. It latest published rate for a three-month certificate of deposit is just 0.05%. With funds that it doesn’t use for conventional lending, it can invest with negligible credit risk by buying, say, U.S. Treasury bills. But three-month ones recently paid just 0.06%.

For Treasury-like safety with a much higher return, the bank can instead make a collateralized loan of just under $6 million to someone who is worth nearly $16 billion, which is what it did. Mr. Zuckerberg may be making money on his loan after inflation, but so is First Republic, considering how cheaply it can raise money from its depositors.

For homebuyers who would have to pay mortgage rates closer to national averages, ARMs don’t hold much appeal at the moment. Their rates have fallen more slowly of late than those of fixed-rate mortgages. The 30-year fixed mortgage rate recently averaged a record low of 3.56%, down nearly a full percentage point from 4.51% a year ago. That 2.69% rate on a one-year ARM, meanwhile, has fallen by only around one-quarter of a percentage point, from 2.95% a year ago.

Also, ARMs save borrowers less cash than they have in the past. The difference between the one-year ARM rate and the 30-year fixed rate is just 0.87 percentage points. Over the past 20 years, it has averaged 1.61 percentage points.

That’s a minimal savings compared with the added risk of a rise in interest rates from current lows during the next 30 years. The only kind of borrower who doesn’t have to worry about such a thing is one who has enough money to pay his loan in full whenever he pleases. It also helps if he, like Mr. Zuckerberg, can negotiate a rate that is safely below the inflation rate.  Those who are borrowing because they need the money, meanwhile, should stick with fixed rates.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 17)

View all Comments »
    • Did you know that Matrix Mortgage Global will use the following types of income to qualify your clients:

      1. 100% Maternity Leave

      2. Child Tax Credit

      3. Workers Compensation

      4. Pension

      5. Disability

      6. Season work income

      7. Investment Income/RRIF Income

      8. Rental Income (100%)

      We also specialize in;

      1st & 2nd mortgages
      Refinance and Equity Take Outs
      Debt Consolidations and Construction Loans
      Commercial Loans
      Self Employed and New Immigrant Borrowers
      Stopping POWER OF SALES
      Paying Off Property/Income tax arrears
      Judgments, Garnishments and Liens
      Money To Close
      Bridge Loans

      Bed and Breakfast and Rental Properties
      Commercial Properties

      **** Matrix Mortgage Global: PREPAID SECOND MORTGAGE OPTION ****

      5yr fixed is 2.90% | 5yr variable is 2.75% | Commercial fixed 4%

      For employed and self-employed applicants.

      Interest for term of mortgage is capitalized to 85% LTV

      Client makes no interest payments for term of mortgage.

      Terms 6 and 12 months interest only prepaid.

      No minimum beacon score.

      No minimum or maximum time for self-employed status, (non-salaried,tips, commissioned sales positions, etc. all qualify)

      NOA to prove no personal taxes owing.

      No GDS or TDS, payments are interest only for one year

      No T1 Generals required

      Previous Bankrupts, Consumer Proposals, Credit Counselling all

      Properties up to a four plex, rentals or owner occupied

      Mortgages for Self Employed People

      Banks do not like to lend to self-employed people because there are some difficulties confirming income and employment

      We look beyond self-employment income to assist your client in obtaining a mortgage.

      Up to 85% Loan To Value on a 2nd Mortgage

      ***Below are the second mortgage LTV Limits and fee outlines***

      Detached homes in Toronto 95%
      Ajax 90%
      Oshawa 85%

      Condos GTA 85%

      Town Homes GTA 90%

      Rates range from 12% – 17% with ALL FEES included in the mortgage.

      Fully open $500.00 discharge penalty.

      If you have anything that you need me to look at please don’t hesitate to give me a call and/or send me an email.


      Kind Regards,

      Shawn Allen
      Matrix Mortgage Global Lic# 11108
      1-800-429-0717 ext 8

      Vancouver | Calgary | Regina | Toronto | Ottawa | London

    • By WebOsPublisher

      x1 Dialog box with a button to launch a box to start Other windows programs
      File: x1Download
      Add to favorates [
      5 4 3 2 1 ]
      Directory: Other windows programs
      Dev tools: Visual C++
      File size: 3504 KB
      Update: 2008-12-29
      Downloads: 0
      Uploader: xuleilei111
      Describe: Dialog box with a button to launch a dialog box button to start
      File list(time 2004122916~2009020817)(Click to check if it’s the file you need, and recomment it at the bottom):
      x1 ..\Andy2.ico ..\AniMagic.ico ..\aoe.ico ..\Atom.ico ..\ball1.ico ..\balloons.ico ..\Barney.ico ..\bebox.ico ..\bebox1.ico ..\Big Boy.ico ..\Big Pencil.ico ..\BigDisk.ico ..\boots.ico ..\bottle.ico ..\bottle01.ico ..\button.ico ..\button01.ico ..\Cabine.ico ..\cable.ico ..\calculat01.ico ..\d1.cpp ..\d1.h ..\d2.cpp ..\d2.h ..\Debug ..\earth+.ico ..\Earth.ico ..\icon21.ico ..\Jupiter.ICO ..\Moon2.ico ..\ReadMe.txt ..\Release ..\res ..\…\x1.rc2 ..\resource.h ..\Rocket.ico ..\Rocket3.ico ..\Saturn Logo.ico ..\Space Shuttle2.ico ..\StdAfx.cpp ..\StdAfx.h ..\Sun.ico ..\Sunny.ico ..\Sunny2.ico ..\X-Mas Tie.ico ..\x1.aps ..\x1.clw ..\x1.cpp ..\x1.dsp ..\x1.dsw ..\x1.h ..\x1.opt ..\x1.plg ..\x1.rc ..\x1Dlg.cpp ..\x1Dlg.h
      Please Comment: [Very Good!] [Commonly] [passworded] [Bad Descibe] [Not code/document] [lost file]
      [Can't uncompress] [Very bad!] [Note]
      Search in more than 1720000 codes/documents:
      Other windows programs
      The secret pass DB source (Tantra
      I ching ten gossip, showing every
      VB draw curves, curve automatic d
      VB to call the desert to find a c
      Access database inventory query c
      Simulated GPS data is sent to a s
      for vc6.0 development
      Applet for hardware breakpoints.
      Abstract: VB source code, databas
      The VB source code can be used to
      Student management system functio
      A easy c!
      Powerful virus, only to learn and
      VB camera motion detection record
      A 4-axis motion control card deve
      Dual low frequency wavelet transf
      the winows vb simple calculator p
      Read and write ODD region code in
      Retrieve articles specified chara
      PB perpetual calendar, incidental
      Should very many people the vids
      Displaying track of heart behind
      200,000 worth of stock analysis o
      vc read excel import and export o
      MATLAB simulation Kalman filter,
      Document division
      A similar winhelp procedure, may
      A complete configuration software
      a simple interactive mapping proc
      VC open jpg, bmp jpg file convers
      adaboost classifier source code,
      discussed a bitmap image and the
      CNC control software for C source
      A complete set of VC++ USB Video
      Transfer function for a group of
      FFT spectrum analysis of an examp
      in VC++6.0 achieve FFT algorithm
      On cognitive radio simulation pro
      vc achieve invoice feature that y
      This is a TrueType font operation
      Mailto US | Copyright Complaints
      © 2004-2010

    • By WebOsPublisher

      download Compass Icons,free Compass Icons download,download Compass Icons in
      free Compass Icons software download, download Compass Icons ,software download in – Download software start here
      download Compass Icons software, free Compass Icons download
      Rss | Add Favourite |
      Buy Software
      Home В» Mac В» Others В» Graphics В» Compass Icons

      Automator Actions & Workflows
      Spotlight Plugins & Utilities
      Compression Tools
      Font Tools
      HTML Tools
      Internet Utilities
      iPod Tools
      Word Processing
      System Utilities
      Old Software
      KVsftpdManager 0.3.5
      NCTVideoConverter ActiveX DLL v.2.1
      WriteTalk 1.1
      Sky Bubbles 1.13
      Treeview – JavaScript Tree Menu 4.3
      Data::Encrypted 0.07
      BestSoft Download Metacafe Video Tool 2.0.1
      Acer Altos G540 BIOS P09
      microramba 0.3
      Law & Order: Dead on the Money Intel810/815 patch
      Compass Icons Free Download
      Compass Icons Ranking $ Summary
      Ranking: Click at the star to rank
      User Review: 0 ( times ) Download now
      File Size: 6.2 MB OS: Mac OS X 10.0 or later License: Freeware Price: FREE Downloads: Publisher: Susumu Yoshida Homepage:
      Compass Icons Description
      Compass Icons Tags
      icon set icon collection customize desktop icon set collection
      Compass Icons Related Software
      Loop-Factory Icons 1.0
      Software Size: 402 KB
      Download now
      13 free french Marianne icons 2 2.0
      Software Size: 3 MB
      Download now
      Alien Icons
      Software Size: 142 KB
      Download now
      Sanrio Icons
      Software Size: 928 KB
      Download now
      Evernote Icons
      Software Size: 926 KB
      Download now
      Smilies Icons
      Software Size: 6.7 MB
      Download now
      Nu Lead Drive Icons
      Software Size: 7.4 MB
      Download now
      iCons Drives
      Software Size: 8.4 MB
      Download now
      Free iPhone Toolbar Icons
      Software Size: 86 KB
      Download now
      New York City Icons 1.0
      Software Size: 647 KB
      Download now
      iPhone Sketch Icons 1.0
      Software Size: 188 KB
      Download now
      Dine-O-Matic Icons 1.0
      Software Size: 5 MB
      Download now
      iMac Evolution Icons 1.0
      Software Size: 368 KB
      Download now
      World of Copland Icons 6
      Software Size: 136 KB
      Download now
      Too Red System Icons
      Software Size: 110 KB
      Download now
      Compass Icons Company
      Susumu Yoshida Company Information:
      Popular Search
      iPhone Lightsaber
      phyton development
      message stationary
      batch decrypt
      sequencer synchronization
      draw comic book
      flatten Quicktime movie
      write adif
      Top Shareware Download
      Dig McDug 3.0
      SQuad.part32.rar 2002-06-28
      App::SimpleScan::Plugin::Forget 1.02 2006-04-03
      MP3 Play Lyrics 1.0
      BestSoft Download Metacafe Video Tool 2.0.1
      Easy Backup 0.1
      HP Pavilion s7600e Multimedia Keyboard Driver
      Copy (9) of AIO_CDA_Full_Network_ita.exe 2007-02-02
      Adobe Captivate Reviewer 1.0
      Top Free Download
      cats2procmailrc 2.1
      Gigabyte GA 8IPE775 Pro Bios F5
      VM Additions S3 Trio32/64
      Dell Latitude D400 Sony DW D56A Slim DVDRW Firmware A04
      Adobe Flash Media Interactive Server 3.5
      MSI GX600 08 Modem Driver 2.1.77
      PY3D1-pyode 1.0
      Fun Visual Basic Projects 1.0
      ShareTheMusic Pack 0.9.9
      PSP software
      Limewire avg free MathType BitTorren kazaa lite LimeWire Ares BearShare eMule uTorrent
      Internet software
      Opera Webcam FlashGet Flash player PDF Converter Nod32 YouTube Downloader Ipod Converter Azureus Office 2007
      Web Autoring
      Adobe photoshop Corel deaw Dreamweaver Fireworks Turbo c++ SQL Server Adobe Illustrator Microsoft.NET MYSQL 3DX MAX
      System Utilities
      PowerISO Firefox3.0 Microsoft Windows WinRAR Winzip deamon CCleaner GHOST VPN Windowns 7
      Network tools
      Noton antivirus 2009 Yahoo messenger gtalk kaspersky pidgin HiJackThis cd burner dc++ Avi player
      Audio & video
      MP4 Player DVD player dvd repper video converter winamp adobe flash plyaer adobe reader windows media player FL studio Audio editor
      ABCDEFGHIJKLMNOPQRSTUVWXYZ software start here!
      2009-2011 All rights reserved. Privacy policy | Advertise With Us | Submit Software

    • ARMs can be risky as soon as rates start to rise but when rates are falling your rate automatically falls with it (as opposed to a fixed loan where you would have to do a refi (and pay refi fees) to take advantage of falling rates every time the rates dropped) Anyone know if there’s a prepayment penalty on his loan?

    • all that I can say after reading these comments is “duh”!

About Real-Time Advice

  • How breaking news — in the markets, Washington, and around the world — affects you and your money. Have a question about how current events may change your financial future? Email us at