Financing
Leverage
Using borrowed money to amplify returns
Full Definition
Leverage means using mortgage finance to control a larger asset than cash alone would allow. With 25% deposit, investors control 4x their capital in property value. This amplifies both gains and losses. If property rises 10%, a 25% deposit investor sees 40% return on their capital. However, leverage also magnifies losses in declining markets.
Related Terms
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Analyse a PropertyMore Financing Terms
LTV (Loan to Value)
Mortgage amount as percentage of property value
ICR (Interest Coverage Ratio)
Rental income compared to mortgage interest payments
Bridging Loan
Short-term finance for quick purchases or refurbishment
Remortgage
Replacing existing mortgage with new one
Equity
Property value minus outstanding mortgage
Portfolio Landlord
Landlord with 4+ mortgaged properties