A home is a place to call your own, raise your family, share with your
friends and feel safe and secure. It is also one of the largest investments
most people have.
Leverage is the ability to control a larger asset with a smaller amount of
cash through the use of borrowed funds. It has been described as using other
people's money to increase your yield and it applies to homeowners and
investors alike. Positive leverage causes the yield to increase as the
loan-to-value increases.
Even a modest amount of appreciation combined with the amortization of a
loan can cause a substantial rate of return on the down payment and closing
costs.
Homes build equity as the price goes up due to appreciation and the unpaid
balance goes down due to amortization.
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