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 they earn on their investment 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 falling interest rate environment, borrowers will often refinance their loans. As a result, an mREIT will have to reinvest the repaid debt in the currently 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.

Is there a mortgage REIT ETF?

There are several mortgage REIT ETFs, including the iShares Mortgage Real Estate ETF (NYSEMKET: REM) and the VanEck Mortgage REIT Income ETF (NYSEMKT: MORT).

What are the largest mortgage REITs?

Annaly Capital Management (NYSE: NLY) was the largest residential mortgage REIT in early 2026 by market cap at more than $15 billion. Meanwhile, Starwood Property Trust led commercial mREITs with a market cap approaching $7 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 cause the Federal Reserve to cut interest rates, which can enable borrowers to refinance at lower rates, forcing mortgage REITs to reinvest their repaid principal at a lower rate. Additionally, real estate loans not backed by government agencies face greater default risk during a recession.

Guide to Investing in Mortgage REITs (mREITs)

A close look at the mortgage REIT sector.

By Matthew DiLallo – Updated Jan 16, 2026 at 3:23 PM EST | Fact-checked by Frank Bass

Key Points

mREITs finance real estate by originating or buying mortgages and MBS, distributing 90% of income as dividends.
Interest rate changes can significantly impact mREIT profitability by affecting funding costs and asset values.
Investing in mREITs offers high dividends but includes risks from interest rate volatility and borrower defaults.

Mortgage REITs, or mREITs, provide real estate financing by originating or purchasing mortgages or mortgage-backed securities (MBS). They are an essential part of the residential mortgage market, helping to finance about 1 million homes in the United States each year. They also support the commercial real estate sector by providing loans to develop, acquire, reposition, and own income-producing properties.

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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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Here's a closer look at the overall mortgage REIT market and the sector's unique risks. Plus, we'll discuss a couple of interesting mREITs you might want to consider.

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Mortgage-Backed Securities (MBS)

Investments that take mortgages, pool them, and then sell the pools of loans to investors as a single investment.

How do mortgage REITs make money?

Mortgage REITs make money in several different ways depending on their business model. Here are some of the different income streams earned by mortgage REITs:

Loan origination fees: Some mREITs originate real estate-backed loans and earn a loan origination fee.
Mortgage servicing rights: Some mortgage REITs will service mortgages owned by third parties, earning a fee for serving these loans.
Interest income: Most mortgage REITs hold mortgages, MBS, and other real estate-backed loans that generate interest income.
Rental income: Some mREITs will also make direct equity investments in real estate, entitling them to the rental income generated by these properties.
Asset sales: Mortgage REITs often earn a gain (or book a loss) on the sale of assets, such as mortgages they originated and sell to a third party or MBS they no longer want to hold.

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Ticker Information Table
Name and ticker	Market cap	Dividend yield	Sector
Starwood Property Trust (NYSE:STWD)	$6.6 billion	10.73%	Financials
AGNC Investment Corp. (NASDAQ:AGNC)	$11.7 billion	13.66%	Financials

Data as of Mar 10, 2026. Showing 2 of 2 tickers.

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

1. Starwood Property Trust

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NYSE: STWD

Starwood Property Trust

Today's Change

(0.11%) $0.02

Current Price

$17.91

Key Data Points

Market Cap

$6.6B

Day's Range

$17.68 - $17.99

52wk Range

$16.59 - $21.05

Volume

31K

Avg Vol

3.6M

Gross Margin

84.95%

Dividend Yield

10.73%

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Starwood Property Trust (STWD +0.06%) is the largest mortgage REIT focused on commercial financing. The company has built a diversified portfolio with $29.9 billion of assets in early 2026, 53% of which comprised commercial loans. Starwood Property also has residential and infrastructure lending platforms, as well as equity investments in owned properties.

In mid-2025, Starwood expanded its equity investments by acquiring Fundamental Income Properties from Brookfield Asset Management (BAM -0.59%) for $2.2 billion. The deal increased the company's diversification by adding a large-scale global net lease platform to its portfolio.

Starwood's diversification beyond the commercial lending sector has enabled it to generate steadier earnings and provided additional growth opportunities. That has supported the company's ability 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.

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2. AGNC Investment

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NASDAQ: AGNC

AGNC Investment Corp.

Today's Change

(2.23%) $0.23

Current Price

$10.78

Key Data Points

Market Cap

$12B

Day's Range

$10.55 - $10.82

52wk Range

$7.85 - $12.19

Volume

305K

Avg Vol

21M

Gross Margin

100.00%

Dividend Yield

13.66%

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AGNC Investment (AGNC +2.18%) is an mREIT focused on investing in mortgage-backed securities protected against credit losses by government agencies like Fannie Mae, Freddie Mac, and Ginnie Mae. The REIT only invests in MBS, which it does on a leveraged basis, primarily using repurchase agreements. It also uses a dynamic risk management strategy to protect the value of its portfolio from interest rate and other risks. As of early 2026, AGNC Investment's portfolio consisted of $90.8 billion of assets and a 7.6 times 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 of its rivals reduced their dividend payments as interest rates rose.

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FAQ on Mortgage REITs

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About the Author

Matt DiLallo has been a contributing Motley Fool stock market analyst specializing in covering dividend-paying companies, particularly in the energy and REIT sectors, since 2012. He also covers 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.

Types of mortgage REITs

There are three main types of mortgage REITs:

Home financing: These REITs focus on investing in mortgages secured by residential real estate such as single-family homes, multifamily properties, and builder lots.

Commercial financing: These REITs concentrate on providing financing to the commercial real estate sector. They'll originate real estate-backed loans to fund the acquisition, development, or redevelopment of commercial real estate such as office buildings or warehouses.

Hybrid: These REITs invest in real estate-backed loans and make direct equity investments in real estate.

Risks of investing in mortgage REITs

Mortgage REITs are riskier than many other investments, including other REITs, because they face certain specific risks, including:

Interest rate risk: While changes in interest rates affect REITs overall, they have an even greater effect on mREITs because changes in short- and long-term interest rates can affect net interest margins by increasing the costs of funding 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 in the current interest rate market, 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.

Investing in Mortgage REITs in 2026

A close look at the mortgage REIT sector.

Key Points

Mortgage-Backed Securities (MBS)

How do mortgage REITs make money?

1. Starwood Property Trust

NYSE: STWD

Key Data Points

2. AGNC Investment

NASDAQ: AGNC

Key Data Points

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FAQ on Mortgage REITs

What are mortgage REITs?

What are mortgage REITs?

Are mortgage REITs worth investing in?

Are mortgage REITs worth investing in?

How are mortgage REITs affected by interest rates?

How are mortgage REITs affected by interest rates?

How often do mortgage REITs pay dividends?

How often do mortgage REITs pay dividends?

Is there a mortgage REIT ETF?

Is there a mortgage REIT ETF?

What are the largest mortgage REITs?

What are the largest mortgage REITs?

How are mortgage REIT dividends taxed?

How are mortgage REIT dividends taxed?

How do economic downturns impact mortgage REITs?

How do economic downturns impact mortgage REITs?

About the Author

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FAQ on Mortgage REITs

What are mortgage REITs?

What are mortgage REITs?

Are mortgage REITs worth investing in?

Are mortgage REITs worth investing in?

How are mortgage REITs affected by interest rates?

How are mortgage REITs affected by interest rates?

How often do mortgage REITs pay dividends?

How often do mortgage REITs pay dividends?

Is there a mortgage REIT ETF?

Is there a mortgage REIT ETF?

What are the largest mortgage REITs?

What are the largest mortgage REITs?

How are mortgage REIT dividends taxed?

How are mortgage REIT dividends taxed?

How do economic downturns impact mortgage REITs?

How do economic downturns impact mortgage REITs?

Understanding mortgage REITs

Best Stocks to Buy Now: Our Buy-and-Hold Picks for March 2026

How Treasury Bonds Work and How to Invest in Them

Investing in Data Center REITs

Investing in Diversified REITs

NYSE: STWD

Key Data Points

How do mortgage REITs make money?

Types of mortgage REITs

Risks of investing in mortgage REITs

1. Starwood Property Trust

2. AGNC Investment

Related investing topics

Mortgage REITs offer higher dividends along with higher risk

Equity REITs versus mortgage REITs

FAQ

Two mortgage REITs to consider in 2026

NASDAQ: AGNC

Key Data Points