Mortgage funds are mutual funds that invest in mortgage loans, creating income for investors from the installment payments the mortgage holders generate as they pay off their mortgage. Mortgage funds are generally regarded as less risky investments compared to equity or bond funds. Bear in mind low-risk isn’t the same as risk-free.
Mortgage loan interest rates are generally higher than interest rates on other debt securities such as bonds or a commercial loanwith the same time to maturity. In the same way, mortgage funds generally produce a higher level of interest income compared to bond funds. Mortgage funds are suitable for individuals who desire interest income for short-term needs and for those looking for a conservative investment for retirement.
Mortgage funds are relatively secure investments sold by private mortgage lenders. These funds usually maintain the majority of their portfolio in mortgage-backed securities, and a minor quantity in cash and perhaps bonds
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