Subprime mortgages: A simple guide
If you're looking to learn a little more about the world of subprime mortgages, you've come to the right place! First of all, let's cover the most important question...
What is a subprime mortgage?
A subprime mortgage is a type of mortgage that's available for people with a poor credit history. If someone has had issues with their credit in the past and has a low credit score, then they may struggle to be accepted for most of the standard mortgages on offer on the high street. This is because companies will view them as a greater risk due to their previous credit history.
What is the subprime mortgage crisis?
At one time, subprime mortgage were more widely available, with companies often granting mortgages to people who weren't in a position to make their repayments due to their financial circumstances. This eventually contributed to a global financial crisis and so since then, subprime mortgages have become more regulated.
While it used to be common for people to be granted 100% mortgages (or even more), these days you can't get a subprime mortgage for more than 95% of the value of your home.
UK subprime mortgage rates
As you might expect, subprime mortgages tend to come with higher than average interest rates. However, we've seen an increasing number of companies offering subprime products recently, and this has led to more competitive rates for people with poor credit history.
Ultimately, the rate you're offered will depend on your specific circumstances. The more severe your credit problems, the higher the rate you'll probably be given.
To learn more about the rates available to you, book a free consultation with one of our advisers and we'd be happy to chat about your options.
Are there any alternatives to getting a subprime mortgage?
Absolutely! There are definitely other ways you can go, depending on your personal situation.
Check your credit report
Before you do anything else, it's a good idea to check your credit history for yourself. Find out what issues are there - and make sure that all the details are correct. You may find that there's a simple way to improve your score so that you don't need to apply for a subprime mortgage after all.
Use a guarantor
If you have a family member who would agree to be named as a guarantor, some companies may be prepared to offer more favourable rates for your mortgage.
Pay a larger deposit
The larger the deposit you pay, the lower the rates you'll generally be offered because the risk is lower to the mortgage lender.
Wait until your credit history improves
Of course, one option is to simply delay your mortgage until your credit history is back on track. Most information stays on your credit report for six years, but other credit issues, such as not being on the electoral roll can be fixed much sooner.
Where's the best place to get a subprime mortgage in the UK?
If you're looking for subprime mortgages, then we'd definitely recommend speaking to a mortgage broker. Here at BB, we have access to subprime mortgages which aren't available on the high street. We also have years of experience and have built a number of useful contacts in the industry.
If you'd like to chat with one of our specialist advisers, you can book your free consultation online.