I've got $200,000 sitting in the bank happily earning 6% interest that's $12,000 per annum... and I'm relaxing.
or .. I can use this $200,000 as a deposit on a $380,000 house = $400,000 with stamp duty etc) So net return = $8,000 per annum net..(2% net /from 4% gross) So I borrow $200,000 at 8% = $16,000 per annum to do that.
So now I'm losing $8,000 per annum ($8,000p.a. net rental earnings - $16,000 p.a. interest bill) when I was happily making $12,000 p.a. on my $200,000 I had in the bank.
So I'm $20,000 p.a. better off leaving my money in the bank) a $12,000 per annum WIN to a $8,000 p.a. LOSS = $20,000p,a, better off. So I'm 10% better off with my money sitting in the bank. ($20,000 p.a.equates to 10% of my original $200,000).
