Real Estate Glossary

What is Leverage?

In real estate, leverage refers to the use of borrowed money or other forms of financing to purchase property. A buyer can use leverage to acquire a property with a smaller down payment, by borrowing a larger portion of the purchase price. The more leverage a buyer uses, the greater the potential return on investment (ROI), but also the greater the potential risk, because a fall in the value of the property could lead to the borrower owing more than the property is worth.