Subprime Mortgage

A class of mortgage used by borrowers with low credit ratings. Often referenced as a major reason for the recent housing crisis.

Borrowers who use subprime loans generally do not qualify for loans with lower rates because they have damaged credit or no credit history, and are thus considered risky by lending agencies. Because the default risk for poor credit borrowers is greater than of other borrowers, lenders charge a higher interest rate on subprime loans.