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How to Capitalize on 7%+ Mortgage Rates and Secure High, Safe Yields


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In today's financial landscape, an extraordinary opportunity has emerged for savvy investors to harness the power of high-yield investments while maintaining safety in their portfolios. With mortgage rates soaring above 7%, the path to earning substantial returns lies in understanding how to capitalize on this favorable interest rate environment. In the paragraphs below, we will explore the strategies to seize this unique chance and emphasize the title's promise of both high yields and security.

Amidst the financial complexities, let's simplify the approach. Mortgage rates exceeding 7% signal a costlier borrowing climate for homeowners. However, they also translate into higher yields for collateralized mortgage securities (CMS). These CMS are investment instruments backed by a pool of mortgage loans, predominantly residential mortgages. When homeowners make their monthly mortgage payments, a portion flows to investors in the form of interest, offering a golden opportunity for yield seekers. Simply ask this question…Would you rather be a borrower of 7.5% mortgage or a lender?

Now, what sets CMS apart from the conventional Treasury bonds? The crux of the matter is the yield differential. Presently, CMS yields are surging well beyond the 6% mark. To put it bluntly, this is dramatically higher than the returns on Treasury bonds. Currently, the yield on a 10-year U.S. Treasury bond has hovered around 4% to 4.5%. Therefore, for those seeking higher returns, venturing into CMS with yields surpassing 6% is a game-changer.

Yet, the allure of CMS doesn't stop there; it thrives on the foundation of safety, ensuring that your investment remains secure. What elevates this opportunity to an exceptional level is the inclusion of government-backed Ginnie Mae securities within the CMS framework. Ginnie Mae, formally known as the Government National Mortgage Association, pledges the punctual payment of principal and interest on mortgage-backed securities, including those bundled into CMS. This government guarantee not only bolsters confidence but also ensures a safety net for investors.

Investing in CMS featuring Ginnie Mae-backed securities offers more than just attractive yields; it provides peace of mind, knowing that the U.S. government stands firmly behind these investments. This remarkable blend of robust returns and unparalleled security makes it an irresistible choice for a wide range of investors, from the most cautious to the most yield-hungry.

However, let's not ignore the fact that all investments carry some level of risk. CMS are no exception, and investors should remain vigilant about interest rate fluctuations and prepayment risks. Rising interest rates can impact the market value of existing CMS, and prepayments can affect the expected duration of these securities. Thus, conducting thorough due diligence, gauging one's risk tolerance, and consulting with financial advisors remain essential steps in navigating this exceptional financial landscape.

In conclusion, the prevailing scenario of mortgage rates surpassing 7% opens the door to a remarkable opportunity for investors. By delving into collateralized mortgage securities with Ginnie Mae backing, individuals can position themselves to enjoy both substantial returns and government-backed security. It's a chance to simplify the complex, balance risk, and reap the rewards of high, safe yields in a market where such opportunities are exceedingly rare.


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About the author

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Matt Goldstein

Managing Director, Private CFO®

Matt grew up just outside Washington DC in Silver Spring MD. He attended Florida State University and completed The Wharton School of Business executive leadership program. Outside of work Matt is a family man and loves spending time with his wife Michele and his two daughters, Mackenzie a freshman at Emory University, and Lexi a Freshman in high school and his two dogs. Matt is also an avid ultra-endurance athlete and loves training for his next big race. He has completed 17 marathons and qualified and finished the Boston Marathon twice, 3 Ironman triathlons, and multiple Ultra trail marathons including a 100K. In August he will be attempting the Leadville 100 which is one of the toughest ultras in the world.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. Investor Disclosures: https://bit.ly/KF-Disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Background and qualification information is available at FINRA's BrokerCheck website.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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