New data from Realty Trac show that wealthy buyers are ramping up their use of mortgages to buy homes. In July, 46 percent of people buying houses ranging from $2 million to $5 million used mortgages - up dramatically from 27 percent a year earlier. With mortgages of $1 million to $2 million, the use of mortgages jumped to 63 percent from 49 percent.
The mortgage spree stands in stark contrast to the rest of the country, which has seen mortgage activity decline with rising rates. Nationwide, 40 percent of houses sold in July were bought with cash, up from 31 percent in July 2012.
According to an article from CNBC.com, housing economists and luxury real estate brokers say the mortgage economics for the wealthy are different than for everyone else. While rising rates make borrowing and buying less affordable for everyday homebuyers, looming rate hikes act as an incentive for affluent borrowers who use loans as financial tools.
However, cash remains king at the very top of the real estate market. More than three-quarters of buyers of homes priced at $5 million or more used cash for their purchases in July - up from 56 percent the year before. Buyers often get a better sale price if they pay in available cash rather than waiting on a loan, but then many rich people get mortgages after they purchase to take advantage of cheap money.
Source: CNBC.com , Jumbo mortgage rush: Why the rich are buying
