Understanding leverage: a beginner’s guide

This guide explains leverage: borrowing money, like a mortgage, to invest in property. Leverage magnifies returns, meaning a small rise in property value can create a large percentage gain on your initial deposit.

Conversely, it also magnifies losses, so a price drop can significantly impact your equity. These gains or losses are unrealised (on paper) until you sell the property, highlighting the importance of long-term investing.

Increased equity from rising values can be borrowed against for renovations or further investment.