What is Leverage effect?

Investment

Leverage effect

Financial mechanism amplifying an investment's return through borrowing.

Full definition

The leverage effect in real estate involves borrowing to invest, allowing control of an asset worth more than one's own contribution. If the investment return exceeds the credit cost, leverage is positive and multiplies the return on equity.

Related terms

Mortgage loan

Bank loan secured by a mortgage on the property.

Loan-to-value ratio

Ratio between the borrowed amount and the property value.

Buy-to-let investment

Purchase of a property with the intention of renting it out for income.

Useful links

Property prices Notary fees Estimation

FAQ

Financial mechanism amplifying an investment's return through borrowing.