California Real Estate Practice Exam

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Study for the California Real Estate Exam with confidence. Engage with interactive questions designed to enhance your understanding of real estate principles, laws, and practices. Prepare thoroughly for your licensing test and ensure you have the knowledge to succeed in your real estate career!

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What financial concept is being used when a person puts down $40,000 in cash and borrows $160,000 to buy a $200,000 home?

Savings
Leverage
Equity
Mortgaging

The correct answer is: Leverage

A person is using leverage when they put down $40,000 in cash and borrow $160,000 to buy a $200,000 home. Leverage refers to the use of borrowed money or debt to finance an investment or purchase. In this case, the individual is using a combination of their own funds and borrowed funds to purchase the home. Option A (Savings) is incorrect because while the person is using their own money in the form of a down payment, the rest of the funds are being borrowed. Option C (Equity) is incorrect because equity refers to the portion of an asset that a person owns outright, without any debt or borrowing. Option D (Mortgaging) is incorrect, as it is not a financial concept, but rather a verb describing the action of obtaining a mortgage loan.