What does the term fixed income imply?
It refers to an investment that comes with a fixed-rate payback policy for a fixed duration of time.
Bonds are the most popular and widely used fixed income investment method, and they are issued by the Federal, Provincial and Municipal governments, and even the Federal Crown Corporations.
Most retired couples and elderly individuals, who have a fixed retirement investment plan or pension income, wish to invest in a small house that better suits their needs but they lack the necessary capital and financial support.
Even most middle aged individuals who are unwell or physically impaired and live on social support feel the need to have a small place they can call home, but their investment opportunities are limited due to their meagre income.
What is the strategy behind Fixed Income Mortgage?
A fixed income mortgage strategy is designed to give real estate investors a chance to own their own property despite their financial constraints and restrictions. Often, most people can afford the principal amounts but the raging interest rates make their mortgage a substantial risk for them.
Fixed income mortgage provides individuals with limited or fixed financial means the chance to enjoy greater profitability and higher ROIs.
Fixed income mortgage is a very broad arena, and it includes several types, which are:
·Government bonds:
Governments bonds are also referred to as the Treasuries, and Sovereigns. These are issued by the government in an attempt to pay off their debts and raise capital of important government activities.
· Agency bonds and securities:
Government agencies are always issuing bonds in order to provide financial support for their mandate, and making sure all the different constituencies are provided with adequate and reliable credit facilities at economical rates.
·Corporate bonds:
Corporate bonds are more commonly known as credit, and these are issued by corporations and organizations that want to expand, innovate, liquidate or pay off their debts among various other business activities.
Corporate bonds have a higher yield as compared to government bonds, since the associated risk factor with investing in the corporate sector is considerably greater.
·Asset-Backed Securities:
Banks and money lending companies accumulate assets, for instance mortgages, and provide them as a security to the investors, in order to raise money.
The mortgage-based bonds are the most popular, and widely used asset-backed securities, and they have the highest yields, exceeding that of corporate bonds in terms of maturity and credit risks.
Majority of the asset-backed securities involve home equity and consumer loans, and therefore, the strategy behind these securities is to offer a facilitating credit improvement, and enhance the credit quality.
How does the Fixed Income Mortgage work?
Majority of the fixed income mortgage plans allow you to avail periodic interest payment schedules, with specified terms of security, return the entire principal amount of your loan within the specified period.
The asset-backed and mortgage-backed securities may require a monthly, quarterly or semi-annually payment on the, the principal amount of the loan, as well as the interest payments, over the specified duration of time. While you will not be taxed on the principal amount, your interest payments will be subjection to taxation.
The majority of mortgage-backed securities involve both interest and principal payments on the house mortgages, for instance, if you apply for a housing loan sponsored by the government, like the Fannie Mae, you will be issued a mortgage-backed security to get instant capital. The bondholders are given the interest and principal payments every month, and this is how you pay off your mortgage and your loan without any added burden or hassle.
What are the benefits of a fixed income mortgage?
Your principal payment remains secure and you earn from the interest income.
If backed by the right issuer, fixed income mortgages are highly low risk. The initial investment will be made by the issuer, and the interest income is indeed the most striking benefit.
Your investment plan has been tailor-made to meet all your needs and financial requirements.
Your investment plan will only be beneficial is it adequately addresses all your financial needs, and allow you to live free of all constraint and monetary burdens.
The fixed income mortgage plan effectively takes into account all your unique and individual financial needs, and based on your financial standing, risk bearing ability and expertise, you will be presented a range of income opportunities and maturity.
Unlimited and unquestionable access to your money.
You can sell your bonds any time you want to, at any given market value. If you feel the urgent need to raise funds or encounter a health or accidental emergency, you can always count of accessing your funds locked in bonds.
All you have to do is sell these at a competitive market value, and access all the funds that you need.
Protect and secure your capital.
There are certain investors who do not enjoy the element of risk associating with investing and they are always looking out to minimize their risks, particularly the elderly and retiring couples.
Fixed income mortgages allow you to receive the principal payment at maturity, and the amount you originally invested will be recovered when the specified duration comes to an end. So basically, fixed income mortgages ensure that you do not have to burden too many losses in a short span of time.
Pile up your earnings
All investments will bring in an income, and the fixed income mortgage investments brings a very reliable, secure and delightful flow of income.
Needless to say that having a diversified income profile will allow you to avail great financial opportunities at lower risks, and higher rates than the market funds or term deposits.
Diversifies your income portfolio:
Fixed income assets always yield greater as compared to equities, and hence, they are incredibly effective and productive for providing diversification to your income portfolios. This will provide a long-term risk facilitating and adjusting ability.
