Mortgage Bond


DEFINITION of 'Mortgage Bond'

A bond secured by a mortgage on one or more assets. These bonds are typically backed by real estate holdings and/or real property such as equipment. In a default situation, mortgage bondholders have a claim to the underlying property and could sell it off to compensate for the default.

BREAKING DOWN 'Mortgage Bond'

Mortgage bonds offer the investor a great deal of protection in that the principal is secured by a valuable asset that could theoretically be sold off to cover the debt. However, because of this inherent safety, the average mortgage bond tends to yield a lower rate of return than traditional corporate bonds that are backed only by the corporation's promise and ability to pay.

  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Consolidated Mortgage Bond

    A bond that consolidates the issues of multiple properties. If ...
  3. Default

    1. The failure to promptly pay interest or principal when due. ...
  4. Corporate Bond

    A debt security issued by a corporation and sold to investors. ...
  5. Negative Convexity

    When the shape of a bond's yield curve is concave. A bond's convexity ...
  6. Mortgage-Backed Security (MBS)

    A type of asset-backed security that is secured by a mortgage ...
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