How Are Mortgage-Backed Securities Different from Other Fixed Income Securities?
In most fixed income securities, borrowers make interest payments periodically and repay the principal of their loan in one lump-sum payment on the date the loan matures. In an MBS, borrowers make both interest and principal payments on a monthly basis on their loans throughout the life of the investment. MBS payments can also vary depending upon the duration of payment and other characteristics. However, because the principal is paid over time during the mortgage rather than all at once at the end, an MBS generally offers investors a greater yield amount than many other fixed-income securities.
- What Is a Mortgage-Backed Security (MBS)?
- What Are the Advantages of Investing in MBS?
- Should I Invest in an MBS Fund Instead of Individual Mortgage-Backed Securities?
- What Are Residential Mortgage-Backed Securities (RMBS)?
- What Are Some Examples of Mortgage-Backed Securities?
- How Are Mortgage-Backed Securities Hedged?
- What Are Collateralized Debt Obligations (CDOs)?
- What Is the Difference between Collateralized Debt Obligations (CDOs) and Mortgage-Backed Securities (MBS)?