A mortgage bond is a type of asset-backed security that allows investors to earn income from the interest and principal payments made by homeowners on their mortgages. While these are often safer than corporate bonds because they are secured by real estate, they carry unique risks like prepayment—where homeowners paying off loans early can lower your expected returns. Common Ways to Buy Mortgage Bonds
This is the most common route for retail investors. Funds like the iShares MBS ETF (MBB) or the Vanguard Mortgage-Backed Securities ETF (VMBS) pool thousands of mortgages, providing instant diversification. buy mortgage bonds
Mortgage Real Estate Investment Trusts (mREITs), such as Annaly Capital Management or AGNC Investment Corp , provide indirect exposure by investing in mortgage debt rather than physical properties. A mortgage bond is a type of asset-backed