The rich are different -- they have cheaper mortgages.

At least that's true for Facebook founder Mark Zuckerberg.

The 28-year-old billionaire refinanced his Palo Alto home April 9 with a 1.05 percent adjustable rate mortgage on a loan of $5.95 million.

The average person getting an adjustable mortgage that month would be paying an interest rate of 2.68 percent on a loan that was fixed for one year, according to Freddie Mac.

So how did Zuckerberg swing such a sweet deal?

As a billionaire, he's a client any bank would like to have.

And his mortgage adjusts monthly, subject to changes in a benchmark interest rate, exposing him to the risk that rates could soar, sending up his monthly payment.

But for the moment, he has an interest rate below the level of inflation, which is currently 1.7 percent.

"Mark Zuckerberg didn't take this loan because he didn't have the money," said Greg McBride of the mortgage website bankrate.com. "He took it because can borrow below the rate of inflation, which is borrowing for free At the point which it no longer makes sense to borrow other people's money he can pay it off."

McBride said loans like Zuckerberg's are "niche products" banks offer to wealthy clients.


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Palo Alto area real estate agent Ken DeLeon said he recommends these kind of adjustable mortgages to clients who are thinking about paying cash for their home.

The Federal Reserve "wants to keep rates low through 2014, so you're looking at 18 to 24 months of free money," he said. "I recommend this to a lot of my young clients from Facebook and LinkedIn and even some early Googlers."

Zuckerberg bought his home in March 2011 for $7.1 million, financing most of the purchase price with a 1.75 percent mortgage from Morgan Stanley, the investment bank that led Facebook's botched public offering in May. That loan also adjusted monthly.

Zuckerberg's new loan is with First Republic Bank.

Contact Pete Carey at 408-920-5419