The CMHC guarantees full and timely monthly payment of principal and interest to the investor. An open MBS is subject to higher early principal repayments. Because they are less liquid than other government-guaranteed vehicles, MBSs often offer higher yields. CMBSs are debt instruments that are collateralized by loans secured by commercial real estate. They offer high yields and monthly payment of interest.
Credit risk is an important consideration with any fixed-income security.
The primary risk of a CMBS derives from the underlying loans. To improve the quality of the bonds issued, a number of credit enhancements are often used. In addition, the rating agencies have developed a conservative approach when evaluating CMBSs. CMBSs are certainly worth a look in our opinion. CMBSs are RRSP-eligible.