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What is a subprime mortgage?

Subprime mortgage is a term used to describe a mortgage available to someone who doesn’t fit the traditional lending criteria from typical high street lenders. This could be due to credit problems or other issues that would cause them to be classed as a ‘higher risk’ borrower. Subprime mortgages tend to have higher interest rates, or may require a bigger deposit as a down payment, but with the help of a specialist whole-of-market broker, such as Mortgage Experience, we can help you access the best deals out there. 


Who are subprime mortgages good for?

Anyone who falls outside of the typical bank lending criteria could consider a subprime mortgage, ranging from those with a bad credit history to more serious issues such as IVA/bankruptcy. Other possible issues include:

  • CCJs
  • Mortgage arrears
  • Defaults
  • Having little to no credit history
  • Debt management

Some minor issues can also push candidates into the position for a subprime mortgage, such as missed payments on credit cards, taking out too much credit, or even not being on the electoral roll for where you live. If you are applying for a mortgage with someone else and they have bad credit or any of the issues listed above, you may need to think about a subprime mortgage, even if your own credit is fine. 

Whether you know for sure or suspect you may fit this criteria and are in need of a subprime mortgage, get in touch with our expert team today who will be able to guide you.


How much deposit is needed for a subprime mortgage?

As you are deemed to be a higher risk, lenders will tend to offer a lower loan to value (LTV) ratio, which means that you will have to put down a larger deposit.

The standard LTV on a residential mortgage with no issues is between 85% to 95% – which equates to a deposit of 5% to 15% – whereas you may be asked for a deposit of between 20% and 30% for a subprime mortgage. If your credit issues are less serious, some lenders may require a 15% deposit. 

Regardless of your mortgage type, it is generally better to put down a larger deposit as you will avoid paying more in the long run, and may secure more favourable rates.

A personal approach to your mortgage

With a Mortgage Experience adviser on your team, you can sit back, relax, and make yourself a cuppa, safe in the knowledge that we will be doing all the heavy lifting to find you a suitable mortgage with the best rates available. This gives you more time to pack, and well, do the actual physical heavy lifting (should you wish) as you move into and enjoy your new home or the financial benefits of your remortgage.

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Are there any alternatives to a subprime mortgage?

The prospect of requiring a bigger deposit and higher rates can put people off subprime mortgages, but that doesn’t mean your journey up the property ladder has to stop. There are several alternatives to subprime mortgages available:

  • Larger deposit – As mentioned above, if you are able to wait and save up for a larger deposit, your risk in the eyes of a lender will be lower, so you may be able to benefit from better rates
  • Work on your finances – As disheartening as it can be to find out your credit isn’t great, try not to bury your head in the sand about it. Taking steps to get your finances in better shape is incredibly worthwhile, and it can give you a chance to save for a larger deposit. There are a number of steps you can take to improve your credit, such as making all credit payments on time, being registered on the electoral roll, and steering clear of forms of unsecured credit, such a payday loans
  • Wait – Some credit issues – such as CCJs – are time limited, and become less of a problem when more time has passed. An expert – such as one of our specialist brokers – will be able to advise if this may apply to your case

Where to find a subprime mortgage lender

Most subprime mortgage lenders out there don’t operate like a typical high street lender, and rarely deal with customers face to face. That’s why working with a whole-of-market broker, like Mortgage Experience, can help you access deals and rates that cannot be found elsewhere. Get in touch with our team today to start your journey. 

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