A residential mortgage is financial agreement that typically represents cash that are paid to investors and that are supported by cash payments received from homeowners. It is comprised of a pool of mortgage loans created by banks and other financial institutions. The cash flows from each of the pooled mortgages.
Commercial lenders originating long term commercial mortgages, as against short term hard money mortgages. Investing in residential mortgage can expose the investors to prepayment risk and credit risk. Prepayment risk is the risk that the mortgage holder will pay back the mortgage before its maturity date.