Leverage (finanční páka)
Finanční páka is leverage in English: using borrowed capital, typically a mortgage, to buy a property with a smaller own contribution. Leverage multiplies both gains and losses on own money: it works positively when the property's total return (rent plus price growth) exceeds the loan interest, and negatively when it is lower. For investment mortgages, the ČNB (Czech National Bank) has recommended since 1 April 2026 (non-binding) an LTV of at most 70 % and a DTI of 7.
Example
A flat for CZK 4,500,000 earns a net CZK 157,500 and rises in price by 5 % (CZK 225,000). Bought for cash, that is 8.5 % a year. With a CZK 3,150,000 mortgage at 5.00 % (interest in year 1 about CZK 156,000) and own funds of CZK 1,350,000, it comes to 16.8 % on own money. But if the price falls by 5 %, the result is −1.5 % without a loan versus −16.6 % with one.
In practice
With rates around 5 % and net yields on Prague flats below that level, leverage works only thanks to price growth, which is not guaranteed. For investment loans, banks often keep LTV at 70 % in line with the ČNB recommendation and want proof that you can manage the payments even without rent. Leverage with no reserve for vacancy or for a rate rise after the fixed-rate period is a gamble.
How it differs
It is not the same thing as LTV: LTV measures the loan against the collateral value, while leverage describes what the loan does to the return on equity. An investment mortgage is the product through which leverage is usually created with property; by itself it says nothing about profitability.
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