Applying for a mortgage and purchasing a new home is an exciting time for any home buyer. However, when looking for a mortgage, many buyers have to contend with the problem of having bad credit. As such, borrowers have to look to less conventional options to borrow the money they need. One such option is a sub-prime mortgage.
WHAT ARE SUB-PRIME MORTGAGES?
A sub-prime mortgage refers to a mortgage with a particularly high interest rate. It is designed to give lenders additional security for an investment that would typically be seen as higher risk. Borrowers with credit ratings below 600 are often the applicants who will require, and be suitable for, a sub-prime mortgage.
A sub-prime borrower will often have credit ratings that include:
– Limited debt experience – meaning the lender’s assessor cannot predict a candidate’s reliability
– Excessive debt – the known income of the individual or family is unlikely to be enough to make repayments
– No assets or property that can be used as security
– Legal judgments outstanding, such as a CCJ
– A history of late or missed payments
Are Sub-Prime Mortgages Dangerous Territory?
Sub-prime mortgages have developed a bad reputation in recent years, having been seen as one of the catalysts behind the financial crisis in 2007-8. Critics felt that careless lending meant many recipients of sub-prime mortgages, who were unable to meet their repayment obligations, added to the UK’s already considerable deficit. It would, of course, be a bold claim to suggest sub-prime mortgages were the sole reason behind the financial crash, so it’s probably not a huge surprise to see sub-prime lending returning to the mortgage market.
Lenders will lend to those who have faced serious financial problems, including repossession and bankruptcy, as well as people with minor blots on their credit records.
If you’d like to discuss your mortgage application with a skilled adviser from the Just Mortgage Brokers team, get in touch today. You can call us on 0800 114 3575 or use our contact form. Alternatively, you can email us at [email protected].