Mortgages as a safe alternative investment option

Unlike traditional forms of investments such as stocks and bonds, investing in mortgages is a  very safe alternative investment option, because  they are always secured by a residential or commercial real estate. It pays a fixed return well in excess of other traditional forms of  fixed investment products such as CDs, savings deposits, money market accounts, and bonds. In most case, if a company which issued securities goes bankrupt, the investors lose most of the money in case of equities, and a substantial portion of their capital in case of bonds. In case of bank deposits and CDs, the principal is insured by the Federal Deposit Insurance Corporation, up to a limit of $ 250,000. But these financial products pay very low interest rate (at the time of writing this article – about 1.3-1.5 % p.a.). Investments in mortgages are protected by  real estate, with responsible lenders using very low loan-to-value ratios, such as 55-65 percent, meaning that the property price has to go down 35-45 percent compared with the appraised value, in order for the part of the principal to  be lost in case of borrower’s default

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