Inside The Sub Prime Mortgage
The sub prime mortgage is known by many names. A sub prime mortgage is also called an adverse credit mortgage, a bad credit mortgage, a bad debt mortgage and many other names. All of them have to do with the same fact - a sub prime mortgage is a mortgage for people who have had credit problems in the past and whose credit rating is less than prime.
Having a prime credit rating means that you are able to take your pick of mortgage products. It probably means you are employed, have some credit that you are repaying properly and have never been in arrears on your mortgage. Unfortunately, hundreds of thousands of us cannot say the same and that's why there is such a demand for the sub prime mortgage.
Subprime Mortgage - Pros
Demand for the sub prime mortgage increased with economic recession in the 1990s when people were having difficulty in repaying their mortgages and other credit. A couple of decades later, those problems have not disappeared and demand for the sub prime mortgage remains as strong as ever. 
In fact, there may be even more demand for the sub prime mortgage as more people find that they struggle with debt. Affording a home is costly these days and it only takes a bit of financial strain to get an adverse entry in a credit report. From there it can be a short step towards getting a sub prime mortgage.
The sub prime mortgage comes in many flavours, depending on how much adverse credit you have. For example, people whose financial problems are some time in the past, but whose recent record has been spotless, might qualify for near prime mortgage products. Unlike the sub prime mortgage, near prime products have conditions and interest rates that are close to those available to borrowers with a squeaky clean credit rating.
Within the designation of the sub prime mortgage are several different categories. In the main, lenders divide their products into light adverse, medium adverse and heavy adverse products, with some also having a sub prime mortgage for those with unlimited adverse circumstances.
Adverse Mortgage Types
These relate to the number of adverse circumstances an applicant has. For example someone who qualifies for a light adverse mortgage is likely to have a couple of arrears and defaults, none of them too recent. Someone who qualifies for a medium adverse mortgage may have County Court Judgements (CCJs) for debts of up to £1,000 or £2,000. Someone who needs a heavy adverse mortgage will have CCJs and may be a discharged bankrupt or have a satisfied individual voluntary arrangement.
Whatever the circumstances there is a sub prime mortgage that matches them. The interest rate that is paid depends on how adverse the circumstances are, and borrowers can expect a loading of anywhere from one per cent to five per cent over a normal interest rate. Another thing to watch for with a sub prime mortgage is how lenders evaluate the different circumstances. One lender might require an IVA to have been satisfied a year ago, another six months ago, and yet another three months ago. All of these are important factors in considering the sub prime mortgage.
