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If you asked a thousand people what they’d do with $1 billion, hundreds would say something like “buy a big house.” And I’d be willing to bet $1 billion that none of them would respond, “take out a $20 million mortgage.”

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Yet actual billionaires take out mortgages all the time. Back in 2018 the Los Angeles Times reported that Elon Musk had taken out $61 million in mortgages. Musk was not yet the richest man in the world, but he was a billionaire many times over.

So why don’t the ultra-wealthy buy homes in cash instead of taking out loans? There are several reasons — and some of them make sense for ordinary people, too.

They keep most of their cash invested

Many billionaires, including Musk, don’t have nearly as much cash as you’d expect. They want their money to earn more money — not just sit in a savings account. Most of their wealth is tied up in investments, like shares in their own companies, stock portfolios, real estate, hedge funds, and more.

So when they want to buy a mansion, billionaires often take out loans instead of selling investments to free up cash. There are two big benefits to this.

1. Their investment earnings are higher than their mortgage rates

Since 2018 (the year Musk reportedly took on millions in mortgage debt), Tesla stock has gained over 40% per year on average. And in 2018, the average 30-year mortgage rate was 4.7%.

We don’t know the terms of Musk’s mortgages, but one thing is for sure: If he had cashed out Tesla shares to pay for his homes, he would have cost himself hundreds of millions in growth by now.

You could earn more than your mortgage rate by investing, too

Most of us don’t have massive stakes in fast-growing companies. But we can still earn more than the average mortgage APR by investing in the stock market.

Since 1957, the S&P 500 Index — which represents most of the U.S. stock market — has gained an average of 10% per year. If you invest in stocks and hold them for years, you could earn more money than you’d save by purchasing a home in cash or paying off your mortgage early.

Some borrowers can still get mortgage rates of 6% or less. Check out our list of the best mortgage lenders to get a quote today.

2. They save money in taxes

Another reason billionaires like to finance home purchases is that it helps them avoid capital gains tax. When you sell an investment that has gone up in value, you pay capital gains tax on your profit.

The capital gains tax rate is either:

• 0% to 20%, depending on your income, for investments held for a year or more (for most Americans, it’s 15%)
• Your ordinary income tax rate for investments held for less than a year

A billionaire would likely pay the highest rate due to their high income. So their tax bill could amount to millions if they sold investments to buy a home.

Further, people who itemize their tax deductions can deduct the interest paid on up to $750,000 of their mortgage balance. If you have a jumbo mortgage and deduct mortgage interest paid on $750,000 of your total mortgage balance, you stand to benefit from more than $10,000 in tax savings per year, assuming today’s average mortgage rates.

You can minimize or avoid capital gains tax, too

Even regular people investing for retirement can save tens or hundreds of thousands of dollars in capital gains taxes.

If you save for retirement through a 401(k) or individual retirement account (IRA), then none of your investments will be subject to capital gains tax or dividend tax. So long as you follow the rules — namely, don’t withdraw money until you’re 59 1/2 or older — you’ll enjoy huge tax breaks.

Investments held in a regular brokerage account aren’t free from capital gains tax, but you’ll pay a much lower rate if you keep your investments for at least a year before selling them. And for most people, the best strategy is to buy and hold for decades.

Want to accelerate your retirement savings and get huge tax breaks? Check out our list of the best IRA brokers and open an account today.

Mortgages are “good debt”

There’s a good reason why mortgages are often referred to as “good debt.” Their interest rates are relatively low, they help you pay for an essential expense (housing), and most homes gain value over time.

While paying in cash is not a bad thing, it’s certainly not a must for most people, nor is paying off your mortgage early. So long as you’re getting the best possible rate and not buying more house than you can afford, a mortgage is a fantastic financial tool — whether you’re a billionaire or not.

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Motley Fool Money does not cover all offers on the market. Editorial content from Motley Fool Money is separate from The Motley Fool editorial content and is created by a different analyst team.James McClenathen has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.