Understanding leverage: a beginner’s guide

Leverage is borrowing money to invest, such as using a mortgage to buy property. It significantly magnifies your financial outcomes.

A small rise in property value can create a large return on your deposit. However, leverage also amplifies risk, as a price drop can cause a substantial loss on your equity. These are unrealised (on paper) until you sell.

As your property's value grows, you can leverage the increased equity for renovations or another investment property.