individual mortgages do not trade in the open market; thus, the principal is not subject to market fluctuations
(as compared to Gov’t TNotes, Gov’t Notes, and Corporate Bonds. In addition, mortgages that have a 65%
LTV enjoy some protection if the underlying property declines in value. Gov’t Notes and Bonds have no
collateral backing but are Gov’t backed and Corporate bonds usually have no specific collateral and are
based upon the full faith and credit of the issuer.
Chart 2 shows the general return of mortgage investments on a current rate of return as compared to other
income producing investments.
Chart 3 is a grid
that shows the
comparative
advantage of
mortgage
investments over
alternative income
producing
investments when
considering
opportunity
risk/reward ratios
by combing Charts
1 & 2.
* Risk in terms of loss of principal taking into consideration opportunity costs if interest rates rise. Generally,