November 14, 20233-minute read
Author: Sarah Sharkey
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Mortgage REITs provide liquidity for the real estate industry and an opportunity for investors. Want to find out more about these unique funds? Read on to learn more about how mREITs work and the pros and cons of investing in them.
What Is A Mortgage REIT?
Mortgage REITs, or mREITs, are investments in purchased or originated mortgages and mortgage-backed securities (MBS) that earn income from the interest paid on those assets. mREITs are essential in providing liquidity in the real estate market. Mortgage REITs, or real estate investment trusts, provide a critical function in the economy through the facilitation of the housing market. Without mREITs, there would be considerably less liquidity in the industry which would make it more difficult for borrowers to find financing opportunities. Mortgage investors can back both commercial mortgage and residential mortgage opportunities. The makeup of an mREIT will vary based on the goals of the investors. An investor can purchase mortgage REITs as they would any other public stock or as part of an ETF or mutual fund. An equity REIT is the most common type of REIT. An equity REIT owns and operates the properties in its holdings. With that, an equity REIT often generates revenue through rental income. A mortgage REIT investment generates revenue through interest income from mortgages and mortgage-backed securities. Equity REITs are able to provide a more stable income. But mortgage REITs can often offer higher dividend yields, especially with rising interest rates.Mortgage REITs Vs. Equity REITs
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Should You Invest In Mortgage REIT Stocks?
A mortgage REIT could be a sound addition to your investment portfolio, as they offer competitive total returns. But you should take some time to review the pros and cons of this investment before making a final decision. First, let’s take a look at the benefits associated with investing in a mortgage REIT. Additionally, you’ll need to consider your personal investment goals. A mortgage REIT could be a good choice if you’re looking for an investment with the potential for relatively high dividend yields. As with all financial products, some drawbacks need to be taken into account. Here’s a closer look: Mortgage REITs have risks associated with them, just like all other investments. Consider if the risks fit within your tolerance.Benefits Of Investing In Mortgage REITs
Risks Of Investing In Mortgage REITs
The Bottom Line
A mortgage REIT could be a good investment opportunity. Luckily, it’s not difficult to invest in mortgage REIT stocks through most brokerage platforms. Considering more ways to invest in real estate? Learn more about investing in commercial real estate with our guide to commercial REITs.
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