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What is a mortgage REIT?

Mortgage REITs are a subcategory of the real estate investment trust (REIT) segment that focuses on real estate financing. The entities purchase or originate mortgages and mortgage-backed securities, earning interest income from their investments. Some mREITs also earn loan origination and servicing fees.

How do mortgage REITs work?

Here’s how it works. In the search for rich dividend yields, mortgage REITs (mREITs) are in a class all their own. These are companies are structured as real estate investment trusts (REITs), but they own interest-bearing assets like mortgages and mortgage-backed securities rather than physical real estate.

Are mortgage REITs a good investment?

Mortgage REITs finance 1.4M US homes yearly, aiding both residential and commercial real estate sectors. mREITs earn through net interest margins, akin to financial stocks, leveraging diverse funding sources. High dividends come with volatility; mREITs face interest rate, prepayment, credit, and rollover risks.

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