Understanding leverage: a beginner’s guide

This guide explains leverage in property investing—borrowing money, like a mortgage, to purchase an asset.

Leverage magnifies returns, meaning a small rise in property value can create a large percentage gain on your deposit. Conversely, it also magnifies losses if prices fall. These are 'unrealised' until you sell.

Increased equity from rising values can also be borrowed against for renovations or a deposit on another property, subject to bank lending rules like LVR restrictions.