What is leverage and how can it benefit you?

Leverage is borrowing money against a property’s value in order to increase the return

on the funds you invest. As long as you earn more from the property than you pay for

the loan, your total return is enhanced.

Maximizing leverage with a high loan-to-value

Loan-to-value (LTV) is the ratio between the dollar amount of the loan to the value of the

property. The larger the loan amount, relative to the property value, the higher the LTV.

Applying for a loan with a higher LTV ratio results in a higher interest rate but also

allows you to better leverage your money.

Sources for high leverage loans

Highly leveraged loans up to and including 100% LTV may be common in residential real

estate but are rare in commercial lending. Commercial banks, which are very conservative

and risk-averse in their loan policies, seldom exceed 75% LTV for commercial loans.

Direct lenders, which provide the funds directly and make their own loan decisions, can

provide commercial loans with higher LTVs.