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 owning equity in a property, they collect interest income.

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 a lot of money when the spread between their borrowing costs and the yields on their investments is wide. However, a narrowing of investment spreads, which typically occurs due to 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, which will cause 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 July 2026, with a market cap of almost $15.5 billion. Meanwhile, Starwood Property Trust led commercial mREITs with a market cap approaching $6.3 billion.

How are mortgage REIT dividends taxed?

Most dividend payments by REITs (both mortgage and equity) held in a regular brokerage account are considered non-qualified dividends, which are taxed at an 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 greater default risk 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 Jul 13, 2026 at 11:58 AM EST | Fact-checked by Frank Bass

Key Points

Starwood Property Trust leads commercial mREITs with its diversified portfolio comprising $31.7 billion in assets.
AGNC Investment focuses solely on Agency MBS and has delivered a 538% total return since its IPO.
Annaly Capital Management, the largest of the residential mREITs, has returned 1,151% since its IPO.

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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)	$6.3 billion	11.29%
AGNC Investment Corp. (NASDAQ:AGNC)	$12.9 billion	12.83%
Annaly Capital Management (NYSE:NLY)	$16.9 billion	12.39%

Data as of Jul 20, 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

Today's Change

(-2.44%) $-0.42

Current Price

$16.59

Key Data Points

Market Cap

$6.3B

Day's Range

$16.52 - $16.98

52wk Range

$16.29 - $20.84

Volume

86.4K

Avg Vol

3.3M

Gross Margin

84.44%

Dividend Yield

11.29%

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Starwood Property Trust (STWD -2.44%) is the largest mortgage REIT focused on commercial financing. The company built a diversified portfolio of $31.7 billion in assets by mid-2026, supported by a relatively low leverage ratio (2.6 times). Starwood Property's portfolio primarily comprises commercial loans (52%). It also has residential (8%) and infrastructure (10%) lending platforms, as well as equity investments in owned properties (20%) and other investments (10%).

Starwood expanded its equity investments in 2025 by acquiring Fundamental Income Properties from Brookfield Asset Management (BAM -1.61%) 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 grew it to over $2.5 billion by mid-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 9.8% annualized total return since its 2009 IPO.

2. AGNC Investment

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NASDAQ: AGNC

AGNC Investment Corp.

Today's Change

(-2.45%) $-0.28

Current Price

$10.95

Key Data Points

Market Cap

$13B

Day's Range

$10.91 - $11.28

52wk Range

$9.12 - $12.19

Volume

986.6K

Avg Vol

15.4M

Gross Margin

100.00%

Dividend Yield

12.83%

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AGNC Investment (AGNC -2.63%) 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 mid-2026, AGNC Investment's portfolio totaled $94.7 billion in assets, and it had a 7.4x leverage ratio.

The REIT's simple strategy has enabled it to pay a stable monthly dividend since resetting the payout in early 2020. That dividend stability 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 538% total return since its IPO in 2008 (as of mid-2026), outperforming the average mREIT during that time frame.

3. Annaly Capital Management

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NYSE: NLY

Annaly Capital Management

Today's Change

(-1.63%) $-0.38

Current Price

$22.64

Key Data Points

Market Cap

$17B

Day's Range

$22.59 - $23.17

52wk Range

$19.75 - $24.52

Volume

190.9K

Avg Vol

7.1M

Gross Margin

99.74%

Dividend Yield

12.39%

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Annaly Capital Management (NLY -1.63%) is the largest residential mortgage REIT with a total portfolio of $106.7 billion as of mid-2026. It has three investment strategies:

Agency: It invests in Agency MBS and Agency CMBS (Commercial MBS), which comprises $92.2 billion of its portfolio.
Residential credit: Annaly invests in non-agency residential mortgage assets (e.g., jumbo loans), comprising $10.3 billion of its portfolio.
Mortgage servicing rights (MSR): The REIT invests in MSR ($4.2 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 opportunities to sell some Agency MBS in the first quarter of 2026, while also meaningfully growing its residential credit and MSR portfolios. Like other mREITs, Annaly uses leverage (an economic leverage ratio of 5.7 times in mid-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 1,151% since its IPO in 1997 (as of mid-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 mid-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 real estate 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: While changes in interest rates affect REITs overall, they have an even greater effect on mREITs because short- and long-term rate changes can affect net interest margins by increasing funding costs and reducing interest income. Interest rate changes can also affect the value of an mREIT's mortgage assets, affecting its net asset value and share price.
Prepayment risk: Mortgage borrowers can refinance their loans or sell the underlying real estate. When that happens, it forces the mREIT to reinvest the repaid loan proceeds at the prevailing interest rate, which might be lower than the rate on the existing mortgage.
Credit risk: Mortgage REITs focused on commercial mortgages can face credit risks if borrowers default. Mortgage REITs that focus on residential loans backed by government agencies don't have to worry about this nearly as much.
Rollover risk: Residential mortgage REITs tend to own long-term mortgages and mortgage-backed securities. However, they often fund these purchases with shorter-duration borrowing since short-term interest rates are generally lower than long-term rates. This funding strategy creates rollover risk. The mREIT must obtain funding at attractive rates to roll over loans as they mature.

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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

With nearly 40 publicly traded mortgage REITs, there are lots of options in the sector. I focused on the largest players in the mREIT sector. Their scale gives them several competitive advantages, including lower cost of capital, long operating histories, and more diversified investment strategies (in some cases). Those features make them some of the lowest-risk ways to invest in the mortgage REIT sector. They should pay stable to growing dividends and generate solid total returns.

Should you invest in mortgage REITs?

Mortgage REITs can generate a significant net interest margin when there's a wide spread between short-term interest rates (where they borrow) and long-term interest rates (where they lend). Unfortunately, the spread doesn't usually stay wide for long, which is why mREITs tend to be more volatile than equity REITs.

Because of that risk, mREITs aren't always the best option for investors seeking a sustainable income stream, since their high-yielding dividends are at a high risk of future reductions. However, a few mREITs are worth considering for more risk-tolerant income investors since their differentiated business models help insulate them from the sector's overall volatility.

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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

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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

NASDAQ: AGNC

Key Data Points

NYSE: STWD

Key Data Points

NYSE: NLY

Key Data Points

2. AGNC Investment

3. Annaly Capital Management

How to buy mortgage REITs