Mortgage Resource Guide
Investing
154 articles10 sections
Investing in mortgages
- How Can I Invest in Mortgages?Start here Buy agency MBS, an MBS fund or ETF, mortgage REIT shares, or a private mortgage note. They differ in minimums, liquidity, taxes, and who absorbs defaults.
- Should I Invest in an MBS Fund Instead of Individual Mortgage-Backed Securities? A fund suits most small investors: low minimums, daily selling, and automatic reinvesting. Individual MBS suit larger buyers who want no annual fee.
How mortgage-backed securities work
- How Are Mortgage-Backed Securities Different from Other Bonds? MBS pay principal and interest monthly and can be repaid early; any yield advantage over Treasuries depends on price and prepayments.
- What Are Residential Mortgage-Backed Securities (RMBS)? RMBS are bonds paid from pools of home loans. Agency RMBS carry a Ginnie Mae, Fannie Mae, or Freddie Mac guarantee; private-label RMBS put default losses on investors.
- What Are Some Examples of Mortgage-Backed Securities? The main MBS types are pass-throughs like UMBS and Ginnie Mae MBS, CMOs that split payments into tranches, and interest-only and principal-only strips.
- What Is a Mortgage-Backed Security (MBS)? An MBS is a bond backed by a pool of home loans that pays investors the borrowers' principal and interest, usually guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac.
- What Is the Difference Between Collateralized Debt Obligations (CDOs) and Mortgage-Backed Securities (MBS)? An MBS is backed by home loans. A CDO is backed by other debts, often MBS tranches before 2008 and corporate loans (as CLOs) today, and splits losses by tranche.
Using leverage to buy property
- How Can I Use Other People's Money to Buy More Rental Properties? Finance more rentals with conventional loans (15% to 25% down, up to 10 financed homes), cash-out or HELOC equity, DSCR, seller, hard-money loans, or partners.
- What Is Leveraging? Leveraging is buying an asset with borrowed money. With 25% down, a 10% price change becomes a 40% gain or loss on your cash, and the loan payment is still due.
REITs and mortgage REITs
- Should I Invest in Mortgage REITs (mREITs)? Mortgage REITs use borrowing to boost dividends, so a small move in rates or mortgage prices can cut book value and payouts.
- What Kind of REITs Are There? REITs are equity, mortgage, or hybrid by what they hold, and listed, public non-traded, or private by how they are sold. Each type differs in liquidity, fees, and risk.
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