CMBS: What Commercial Mortgage-Backed Securities Are and How They Work
Warren Team
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Key terms
- MortgageA loan used to purchase real estate where the property serves as collateral. The borrower makes regular payments over a set term (typically 15-30 years) until the loan is paid off.
- SecuritiesTradable financial assets including stocks, bonds, options, and mutual funds. Regulated by the SEC (Securities and Exchange Commission) to protect investors.
- Fixed-Rate MortgageA mortgage where the interest rate remains constant throughout the loan term, providing predictable monthly payments. Most common terms are 15 and 30 years.
- Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that adjusts periodically based on market conditions. Initial rates are typically lower than fixed-rate mortgages but can increase over time.
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