Sub-prime Mortgage
What is a Sub-Prime Mortgage?
Sub-prime is a term used for people with poor credit history and is not something unique to mortgages. People with a patchy financial record will usually be offered sub-prime mortgages or any other form of credit such as a sub-prime loan. How bad the credit history is depends on the consumer as well as the lender’s criteria for assessing risk. A missed payment on a credit card may be enough to merit someone a sub-prime status, a previous bankruptcy certainly would.More...
Your risk factor would vary depending on the condition of your credit history as well as the lender’s lending policy. Sub-prime mortgages typcially start off on a very low rate only to switch to a higher level of interest after a year or two. The flaws were there from the start. People barely able to meet repayments during the ‘teazer period’ stood no chance of making payments when the rates skyrocketed. Mortgage lenders started chasing profits by lending to people who were not able to afford the repayments – known as ‘sub-prime mortgages’. The cracks in this policy began to show when interest rates rose plummeting many sub-prime mortgage holders into foreclosures. What began as cracks turned into canyons when the housing market fell leaving banks with properties worth less than the loan value. When this happened it affected the entire US credit industry as well as the economies of Great Britain and Europe. Make yourself at home in our Forum and find out what everyone else in America thinks about mortgages. There is also our up-to-date News section for all the latest on personal finance. If you need help finding a provider or would like to review a company, please don’t go without checking out our A-Z directory. Return to Debt homepage.How did the Sub-Prime crisis happen?
