Subprime Mortgage Is A Specialist Mortgage Product For People With Bad Credit History

If you have recently applied for a mortgage and found yourself on the rejection pile

due to bankruptcy or a bad credit history, then you may find a subprime mortgage would be the one for you. A subprime mortgage loan is a mortgage that is specifically designed for people who are denied prime or standard mortgages by traditional or hard money lenders. A subprime mortgage may be suitable for people who have a poor credit rating or have difficulty proving a regular, reliable income. One of the important aspects that you may have to pay attention to is the interest rate: if it is higher than the market level, it is not a good sign. Moreover, if the level of your mortgage rate is in the 15% range and the offered interest rate is around 5%, then you could possibly be facing a subprime mortgage. Understanding a subprime mortgage and the benefits which it may offer your situation may aide you in obtaining a mortgage.

More and more people seem to need subprime mortgages these days. This is probably because many people do not meet high street lenders' criteria for mortgage loans. With most high street lenders, you have to have a near perfect credit report, be employed and be able to prove income, have a consistent address and credit history and show other signs of financial stability. These people benefit from the best interest rates, while rates for sub prime mortgages tend to be higher. However, not everyone has had the perfect circumstances and this is why subprime mortgages have become so important. There are several reasons why people might need sub prime mortgages. Sub prime mortgages are important for people who have had County Court Judgments (CCJs) against them. CCJs are all too easy to get in these days of rising debt. It only takes a small unpaid debt for a company to petition the court to enter a judgment against you. This means that the company has some guarantee that they will be paid. However, it does nothing at all to help your credit rating. There are several other reasons why people may need subprime mortgages. If you become ill or lose a job and are unable to make mortgage payments, then the arrears or defaults will appear on your credit record. Many people find themselves experiencing financial difficulty in the wake of relationship breakdown and may find that they just can't make all the payments they need to make. Eventually, they may resort to sub prime mortgages to get their finances straight again.

Prime mortgages, or standard mortgages, are offered to people with good credit history. They have reasonably low fixed or variable rates of interest and few penalty clauses. A subprime loan will have a slightly higher rate of interest than a prime mortgage and may also carry some penalties for early repayment or for default. The two products are different because lenders feel they are taking a bigger risk lending money to someone who already has a bad credit history. Of course, some people may not be in financial difficulty, but may still need subprime mortgages. Many self employed people are in this category, because it can be difficult for them to prove income. They may go for a self certification mortgage, which is another of the terms for subprime loan. People who have lived out of the country may not appear on the electoral roll. Without a proven address, they may have no choice but to opt for subprime mortgages. The good news is that subprime mortgages can be used for credit repair, which means you could soon be eligible for another type of mortgage.

by: Ask Bill

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