What is Leverage?

Leverage in Relation to the HUD 232 Loan Program

Leverage is the concept of financing assets with borrowed money. It can also be defined as the amount of debt used to finance an asset, which is typically used as collateral for the purchase. Lenders frequently place limits on the amount of leverage a borrower can utilize. A ‘highly leveraged’ company, investment, or property has more debt than equity. HUD 232 lenders and HUD itself often measure leverage via loan-to-value ratio, or LTV.

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