Should You Leverage Mortgage-Free Property? Evaluating the Risks and Returns
RealYield Team
Property Analyst
For many landlords, the ultimate goal is to own their portfolio "free and clear." There is an undeniable peace of mind that comes with receiving rent without a mortgage payment taking the lion's share.
However, from a purely financial perspective, leaving 100% of your equity tied up in a single property is often the least efficient way to grow your wealth. This is the dilemma of leverage.
The Math of the Mortgage-Free Property
Let's say you own a property worth £300,000. It rents for £1,500 per month (£18,000/year). After costs (insurance, maintenance, management), you keep £14,000.
Your Return on Equity (ROE) is 4.6%. That's stable, but it's not far off what you could get in a high-interest savings account with zero effort and zero risk.
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