When you buy Ginnie Maes (GNMAs) at Schwab, you'll receive United States government-guaranteed monthly payments and higher yields than Treasury investments with comparable maturities. GNMAs are mortgages purchased by banks and other lending institutions from the government and resold in shares to investors. Most of these mortgages are 30-year, single family home, fixed-rate loans. Payments of principal and interest that homeowners make every month to pay off their mortgages are passed through to GNMA investors like you.
GNMAs may involve the additional risk of prepayment, but the timely payment of principal and interest to investors is guaranteed by the Government National Mortgage Association (GNMA), a federally owned corporation backed by the full faith and credit of the United States government.
Benefits of GNMAs
GNMAs can be an attractive investment choice that gives you the benefits of:
U.S. government guarantee GNMA is a government-owned corporation, so your GNMA investment is backed by the full faith and credit of the U.S. government.1
Guaranteed monthly payments
GNMA guarantees that you'll receive a payment every month of the principal and interest owed by homeowners on the mortgages underlying your security, whether or not homeowners meet their obligations. Payment size may vary from month to month. And if homeowners decide to pay more than their required amounts, you may receive larger monthly payments due to the greater portion of principal returned. As principal is repaid, your future payment amounts will decrease. If mortgages are prepaid in full, you'll receive back part of your original investment which may have to be reinvested at a lower rate.
Higher yields
Historically, GNMAs have provided yields that are higher than those for Treasuries of comparable maturities. In fact, since 1980, a GNMA investment has yielded from about 0.8% to 2.3% more than a 10-year Treasury note. Determining the exact yields on GNMAs is difficult because of the effect of prepayments on the amount of monthly income investors receive. For this reason, stated yields on GNMAs are always approximate. And past performance doesn't guarantee future returns.
Liquidity
GNMAs are easy to buy and sell because they're the most widely held and traded mortgage-backed security. If you'd like us to sell your GNMA before it matures, a Schwab Bond Specialist™ will get you a bid. The price you receive when you sell may be more or less than the principal amount invested.
Minimum investment
$25,000 face value initial investment. Incremental investments are $1,000.
Why buy GNMAs at Schwab?
GNMAs are the most widely held and traded mortgage-backed security in the world, and Schwab makes them easy to buy and sell. Just call a Schwab Bond Specialist™ at 888-621-4355.
1. The value of "guaranteed" securities fluctuates due to changing interest rates or other market conditions. Investors may experience a gain or loss due to prepayment of obligations and may receive back part of their investment before redemption.
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