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Zuck's Sweet ReFi: Is This Why It's Called the One Percent?

Mark Zuckerberg
CNBC
Mark Zuckerberg

You can’t blame Mark Zuckerberg for getting a great deal on his new mortgage.

But wealth experts say Zuckerberg’s loan – at just 1.05 percent – is symptomatic of a new credit gap in America between the haves and have-nots.

While the wealthy are able to take advantage of record-low rates and home loans at between 1 percent to 2 percent, many Americans are having trouble refinancing their homes at more than 3 percent. Many other Americans can’t get loans at all, or are struggling to pay double-digit interest rates for credit-card debt.

Experts and economists say the credit gap could, over time, make America’s high level of financial inequality even higher.

“You run into a situation where people in the bottom 30 percent are dealing with huge fees and fine print and the top has very straightforward loans with low rates,” said Michael Norton, an associate professor of the Harvard Business School who has studied inequality. “That can compound inequality. It would be gradual. But it’s a real possibility.”

Of course, the Facebook chief's loan is unusual even by super-rich standards. According to filings with the Santa Clara Clerk’s office, Zuckerberg’s home in Palo Alto was refinanced this spring with a 30-year adjustable rate mortage of $5.95 million.

The interest rate is 1.05 percent for the initial period. It can reset if interest rates rise, since the loan is tied to LIBOR. But for now his interest-only payments would amount to less than $6,000 a month.

Private-bank executives say that the typical loan rate for clients with $10 million or more in assets is closer to 2 percent, yielding payments on a $6 million loan of more than $10,000 a month. So Zuckerberg is saving $4,000 a month over the average rich borrower. (Let alone the rates of 3 percent or more for average borrowers).

Greg Berardi, a spokesman for First Republic, which made Zuckerberg’s loan, said in a statement, "First Republic, like most banks, prices its credit products based on the strength and totality of the entire client relationship. This is our approach with all of our clients. We do not comment on the specifics of relationships with clients."

“I haven’t seen anyone offering one percent,” one private-bank lender told me. “The lowest that I’ve seen out there is about 1.5.”

Bankers say First Republic may have given Zuckerberg such a low rate to win some wealth management business on his multi-billion-dollar fortune. They also say that a loan with a rate of 1 percent may have a pre-payment penalty, making it costly for Zuckerberg to pay off the loan and refinance with a fixed-rate mortgage if interest rates start going up.

Still, wealth management experts say that Zuckerberg can take his one-percent money and invest it in higher-yielding investments. “It’s free money,” one private banker said. “He’d be nuts not to take it.”

What’s more, Zuckerberg not exactly a credit risk right now. Even though Facebook’s stock still well below it’s highs, Zuckerberg is still worth more than $14 billion. And that’s enough to make any private banker salivate.

-By CNBC's Robert Frank
Follow Robert Frank on Twitter:
@robtfrank