QS Study

Subprime Mortgage

A subprime mortgage is a type of loan granted to individuals with poor credit histories (often below 600), who, as a result of their deficient credit ratings, would not be able to qualify for conventional mortgages. It is a type of mortgage that is normally issued by a lending institution to borrowers with low credit ratings. When a person who holds a mortgage as security for a loan which he has made, procures a loan to himself from a third person and pledges his mortgage as security, the effects what is called a “submortgage.”

A subprime mortgage is a type of loan granted to individuals with poor credit histories (Often below 600), who, as a result of their deficient credit ratings, would not be able to qualify for conventional mortgages. Because subprime borrowers present a higher risk for lenders, subprime mortgages charge interest rates above the prime lending rate. These loans carry higher interest rates, justified by the greater risks associated with buyers that have poor credit. People who are approved of subprime mortgages historically have low credit scores and problems with debt.

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