Legal Definitions - subprime mortgage

A subprime mortgage is a type of loan that is given to people who have a low credit score or a poor credit history. These loans are used to buy property, such as a house. Subprime mortgages are considered to be riskier than traditional mortgages because the borrowers are more likely to default on the loan.

John has a credit score of 550 and wants to buy a house. He applies for a subprime mortgage and is approved for a loan with a high interest rate and unfavorable terms. Because of his low credit score, John is considered a high-risk borrower and is charged more for the loan.

Another example is Sarah, who has a history of missed payments and defaults on her credit report. She also applies for a subprime mortgage and is approved for a loan with even higher interest rates and stricter terms.

These examples illustrate how subprime mortgages are given to borrowers who are considered high-risk due to their credit history. The lenders charge higher interest rates and impose stricter terms to compensate for the increased risk of default.