mortgage bond

A bond secured by a mortgage on property. Mortgage bonds are backed by real estate or physical equipment that can be liquidated. Mortgage bonds are usually considered high-grade, safe investments and safer than unsecured bonds. If an issuer in default has both secured and unsecured bonds outstanding, secured bondholders are paid off first, then unsecured bondholders. Because unsecured bonds carry greater risk than secured bonds, they usually pay higher yields.