We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is a Mortgage Yield?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Also known as a cash flow yield, a mortgage yield is the amount of returns that are generated from a set of mortgage-backed securities, such as mortgage-backed bond issues. One of the benefits of calculating this type of yield is to determine if the anticipated return from the mortgage-backed security compares favorably with other types of bond issues, allowing investors to decide if those securities are worth the time and resources necessary to acquire the investment. Typically, the mortgage yield is calculated as a monthly rate, although it is possible to project the yield for a longer period of time.

The basic process for calculating the mortgage yield associated with a mortgage-backed bond requires making a few assumptions on the front end. This includes making the assumption that the payments on those mortgages will occur according to the schedule outlined in the mortgage terms and conditions, which usually require monthly installment payments. From there, it is possible to identify the portion of those payments that have to do with both the balance owed on the principal of the loan and the portion that is used to settle the interest due on that mortgage loan. By relating this data to how quickly the mortgage pool of assets is expected to be paid in full, it is possible to determine the discount rate for the securities and see if the monthly mortgage yield is in line with the actual return earned by the mortgage holder.

Identifying the mortgage yield associated with mortgage-backed bonds is very helpful in terms of comparing the potential of the investment with other options. This includes comparing the return or yield with other types of bond issues, and determining if the mortgage yield is sufficient to merit the investment. This type of assessment often helps to provide perspective in terms of what could be earned from using that same amount of resources to purchase a different set of mortgage-backed bonds or other types of bond issues.

Investors make use of the mortgage yield as one of the more important ways to evaluate the feasibility of purchasing a pool of mortgage-backed securities. Along with assessing the amount of return or yield they can reasonably expect, investors can also look to the nature of the securities themselves and decide if the level of risk involved is reasonable in comparison to that anticipated yield. Should the investors feel that the return is not sufficient when compared to the level of risk, they can choose to invest in other types of bond issues or even other types of securities.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.