What are mortgage REITs?

Mortgage REITs are real estate investment trusts (REITs) that focus on owning mortgages and other loans backed by residential and commercial real estate. Instead of generating rental income from equity investments, they collect interest income from debt investments.

Are mortgage REITs worth investing in?

Mortgage REITs can be worth investing in. They typically invest in lower-risk loans backed by residential or commercial real estate. However, they often use leverage (i.e., debt and other capital sources) to boost their returns. That strategy can enable mortgage REITs to make significant profits when the spread between their borrowing costs and the yields on their investments is wide. However, a narrowing of investment spreads, typically driven by changes in interest rates, can significantly affect the returns these REITs earn. They tend to be riskier investment vehicles that often offer higher-yielding dividend payments that can fluctuate significantly.

How are mortgage REITs affected by interest rates?

Changes in interest rates affect both the borrowing costs of mREITs and the yields on their investments. For example, during a period of falling interest rates, borrowers often refinance their loans. As a result, an mREIT will have to reinvest the repaid debt in the current lower-rate environment, causing its income to decline. Meanwhile, rising rates make it more expensive for an mREIT to borrow money to finance its existing portfolio.

How often do mortgage REITs pay dividends?

Most mortgage REITs pay quarterly dividends. However, some mortgage REITs, including AGNC Investment, pay a monthly dividend.

What are the largest mortgage REITs?

Annaly Capital Management was the largest residential mortgage REIT in September 2026, with a market cap of almost $16.8 billion. Meanwhile, Starwood Property Trust led commercial mREITs in market cap at $5.8 billion.

How are mortgage REIT dividends taxed?

Most dividend payments by REITs (both mortgage and equity) held in a regular brokerage account are treated as non-qualified dividends, which are taxed at the investor's ordinary tax rate.

How do economic downturns impact mortgage REITs?

Economic downturns can affect mortgage REITs in many ways. They often prompt the Federal Reserve to cut interest rates, enabling borrowers to refinance at lower rates and forcing mortgage REITs to reinvest repaid principal at lower rates. Additionally, real estate loans not backed by government agencies face a higher risk of default during a recession.

3 Best Mortgage REITs for 2026 and How to Invest

A close look at the mortgage REIT sector.

By Matthew DiLallo – Updated Sep 7, 2026 at 1:49 PM EST | Fact-checked by Frank Bass

Key Points

According to Nareit, mortgage REITs finance about 1 million U.S. homes each year through loan originations and investing in mortgage securities.
The top mREITs for 2026 include Starwood, AGNC, and Annaly.
Annaly Capital raised its dividend again in 2026, indicating improved earnings.

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Ticker Information Table
Name and ticker	Market capMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.	Dividend yield
Starwood Property Trust (NYSE:STWD)	$6.0 billion	11.94%
AGNC Investment Corp. (NASDAQ:AGNC)	$12.6 billion	13.52%
Annaly Capital Management (NYSE:NLY)	$17.2 billion	12.49%

Data as of Sep 7, 2026. Showing 3 of 3 total entries.

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Here's a closer look at these leading mortgage REITs.

1. Starwood Property Trust

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NYSE: STWD

Starwood Property Trust

Premium Feature

Moneyball Superscore

58/100

Today's Change

(1.26%) $0.20

Current Price

$16.08

Key Data Points

Market Cap

$6.0B

Day's Range

$15.79 - $16.18

52wk Range

$15.48 - $20.84

Volume

3.8M

Avg Vol

Gross Margin

82.98%

Dividend Yield

11.94%

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Starwood Property Trust (STWD +1.26%) is the largest mortgage REIT (by market cap) focused on commercial real estate financing. The company built a diversified portfolio with $32.2 billion in assets as of early September 2026, supported by a relatively low balance-sheet leverage ratio (2.7x). Starwood Property's portfolio primarily comprises commercial loans (53%). It also has residential (8%) and infrastructure (9%) lending platforms, as well as equity investments in owned properties (21%) and other investments (9%).

Starwood expanded its equity investments in 2025 by acquiring Fundamental Income Properties from Brookfield Asset Management (BAM +0.62%) for $2.2 billion. The deal increased the company's diversification by adding a large-scale global net lease platform to its portfolio. It provided the REIT with an expandable platform (Starwood had grown it to over $2.7 billion by early September 2026).

Starwood's diversification beyond the commercial lending sector has enabled it to generate steadier earnings and provided additional growth opportunities. That has allowed the company to maintain its high-yielding dividend for more than a decade. That dividend security has been hard to find in the mREIT sector, where payouts have generally declined over the years due to interest rate volatility and other factors. Starwood has also generated a strong 9% annualized total return since its 2009 IPO.

2. AGNC Investment

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NASDAQ: AGNC

AGNC Investment Corp.

Premium Feature

Moneyball Superscore

47/100

Today's Change

(-0.09%) $-0.01

Current Price

$10.65

Key Data Points

Market Cap

$13B

Day's Range

$10.57 - $10.73

52wk Range

$9.63 - $12.19

Volume

16.6M

Avg Vol

17M

Gross Margin

100.00%

Dividend Yield

13.52%

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AGNC Investment (AGNC -0.09%) is an mREIT focused on investing in Agency MBS, pools of residential mortgages protected against credit losses by government agencies (Fannie Mae, Freddie Mac, and Ginnie Mae). The REIT invests only in Agency MBS, which it leverages primarily through repurchase agreements (RePo). It also uses a dynamic risk management strategy to protect the value of its portfolio from interest rate and other risks. As of early September 2026, AGNC Investment's portfolio totaled $97.2 billion in assets, and it had a 7.4x leverage ratio.

The REIT's simple strategy has enabled it to maintain a stable monthly dividend for 75 consecutive months (as of the end of the second quarter of 2026). That dividend stability over the past few years has made it stand out in a sector where many rivals cut their dividends as interest rates rose. While AGNC has cut its payout several times in the past (including in 2020), it has generated a 616% total return since its IPO in 2008 (as of early September 2026), outperforming the average mREIT during that time frame.

3. Annaly Capital Management

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NYSE: NLY

Annaly Capital Management

Premium Feature

Moneyball Superscore

71/100

Today's Change

(-0.09%) $-0.02

Current Price

$22.81

Key Data Points

Market Cap

$17B

Day's Range

$22.61 - $22.95

52wk Range

$20.00 - $24.52

Volume

5.9M

Avg Vol

7.4M

Gross Margin

99.87%

Dividend Yield

12.49%

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Annaly Capital Management (NLY -0.09%) is the largest residential mortgage REIT with a total portfolio of $109.4 billion as of early September 2026. It has three investment strategies:

Agency: It invests in Agency MBS and Agency CMBS (Commercial MBS), which comprises $95 billion of its portfolio.
Residential credit: Annaly invests in non-agency residential mortgage assets (e.g., jumbo loans), comprising $10.4 billion of its portfolio.
Mortgage servicing rights (MSR): The REIT invests in MSR ($4.1 billion of its portfolio), which obligates it to service residential loans in exchange for a fixed servicing fee.

The REIT's diversification allows it to invest where it finds the best returns. For example, it capitalized on higher rates during the second quarter to increase its Agency portfolio by nearly $3 billion, while roughly maintaining the size of its residential credit and MSR portfolios. Like other mREITs, Annaly uses leverage (an economic leverage ratio of 5.6 times at the end of the second quarter of 2026) to invest in additional mortgage assets. This strategy boosts its returns (11% to 16% returns across its three platforms in 2026).

The mREIT has generated a total return of 1,266% since its IPO in 1997 (as of early September 2026), primarily driven by dividend income. While Annaly has cut its dividend several times over the years due to interest rate volatility and other factors, it raised its quarterly dividend from $0.65 to $0.70 per share in early 2025 and again in the second quarter of 2026 (to $0.75 per share), reflecting its improved earnings profile.

How to buy mortgage REITs

Here's a step-by-step guide on how to invest in mortgage REITs:

Open your brokerage app: Log in to your brokerage account where you handle your investments. If you don't have one yet, take a look at our favorite brokers and trading platforms to find the right one for you.
Search for the REIT: Enter the ticker name into the search bar to bring up the stock's trading page.
Decide how many shares to buy: Consider your investment goals and how much of your portfolio you want to allocate to this stock.
Select order type: Choose between a market order to buy at the current price or a limit order to specify the maximum price you're willing to pay.
Submit your order: Confirm the details and submit your buy order.
Review your purchase: Check your portfolio to ensure your order was filled as expected and adjust your investment strategy accordingly.

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Benefits and risks of investing in mortgage REITs

Benefits:

High dividend yields: Mortgage REITs typically offer very high dividend yields, providing investors with the potential to earn lucrative passive income.
Lower-risk real estate exposure: Mortgages and real estate-backed loans tend to be less risky investments.
Diversification: Investing in REITs can help diversify your portfolio. Mortgage REITs provide exposure to both the real estate and fixed-income asset classes.

Risks:

Interest rate risk: Changes in interest rates hurt mREITs more than equity REITs because they affect both sides of their balance sheets simultaneously. They typically fund long-term mortgage holdings with short-term borrowings (because short-term rates are lower), meaning they need to routinely roll over their funding at prevailing rates. Rising short-term rates squeeze their margins (the spread between borrowing costs and mortgage income).
Prepayment risk: When borrowers refinance their loans or sell their properties, the mREIT receives an early principal repayment. They must reinvest those proceeds, which is often at a lower rate than the original loan.
Credit risk: While mortgage REITs that invest in Agency-backed residential loans don't face credit risk, those that invest in commercial loans or non-Agency residential mortgages face potential losses if borrowers default.

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An infographic explaining the risks of investing in mortgage real estate investment trusts (REITs). — Image source: The Motley Fool

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Methodology: How these stocks were chosen

I considered four factors to narrow the list from the nearly 40 publicly traded mortgage REITs: Scale, financial strength, dividend track record, and diversification. I favored the largest mREITs because they tend to have lower cost of capital, longer operating histories, and greater resources to manage risk. I also looked for those with relatively conservative leverage ratios, solid dividend track records compared to their peers, and, in some cases, favored portfolio diversification. These traits make this group of mREITs lower risk ways to invest in the sector, positioning them to pay stable-to-growing dividends over the long term.

Should you invest in mortgage REITs?

Mortgage REITs make the most money when there's a wide spread between short-term borrowing rates and long-term lending rates. That spread usually doesn't remain wide for long, making mREITs more volatile than equity REITs. As a result, they're not always the best option for investors seeking durable dividend income.

However, this trio of mREITs stands out compared to their peers. Here's a quick snapshot of who might want to consider investing in each one:

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Mortgage REIT	Best for	Reasoning
Starwood Property Trust	Those seeking diversification and income durability.	It spreads risk across commercial, residential, and infrastructure lending, as well as direct equity investments. STWD has also delivered more than a decade of dividend stability.
AGNC Investment	Those seeking simplicity and a monthly income stream.	It focuses solely on Agency MBS and pays a high-yielding monthly dividend.
Annaly Capital Management	Those seeking scale and income growth.	NLY is the largest mREIT, with complementary strategies, and pays a growing dividend.

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These mREITs offer investors comfortable with the sector's risk factors three different ways to collect a high-yielding income stream. However, more risk-averse investors might want to consider investing in a safe REIT instead.

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Investing in mortgage REITs: FAQ

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About the Author

Matt DiLallo has been a contributing Motley Fool stock analyst specializing in the energy, industrials, and real estate sectors since 2012. He also covers dividend-paying stocks, pre-IPO companies, ETFs, and other investing topics. He holds an MBA from Liberty University.

TMFmd19

@MatthewDiLallo

Matt DiLallo has positions in Brookfield Asset Management and Starwood Property Trust. The Motley Fool has positions in and recommends Brookfield Asset Management and Starwood Property Trust. The Motley Fool has a disclosure policy.

3 Best Mortgage REITs for 2026 and How to Invest

A close look at the mortgage REIT sector.

Key Points

1. Starwood Property Trust

NYSE: STWD

Key Data Points

2. AGNC Investment

NASDAQ: AGNC

Key Data Points

3. Annaly Capital Management

NYSE: NLY

Key Data Points

How to buy mortgage REITs

Benefits and risks of investing in mortgage REITs

Methodology: How these stocks were chosen

Should you invest in mortgage REITs?

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Investing in mortgage REITs: FAQ

About the Author

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Investing in mortgage REITs: FAQ

What are mortgage REITs?

Are mortgage REITs worth investing in?

How are mortgage REITs affected by interest rates?

How often do mortgage REITs pay dividends?

What are the largest mortgage REITs?

How are mortgage REIT dividends taxed?

How do economic downturns impact mortgage REITs?

1. Starwood Property Trust

Benefits and risks of investing in mortgage REITs

Methodology: How these stocks were chosen

Should you invest in mortgage REITs?

Related investing topics

3 top mortgage REITs for 2026

NYSE: STWD

Key Data Points

NASDAQ: AGNC

Key Data Points

2. AGNC Investment

3. Annaly Capital Management

How to buy mortgage REITs

NYSE: NLY

Key Data Points