Can I have a simple-4-dummy-explanation on what subprime mortgage is?
I need a simple explanation on what subprime mortgage is. Please don’t use too many financial terms, and try explaining it as you would a 6 years old.
- Economically retarded fella
A loan to a high-risk borrower – usually with considerable worse terms than a "prime" loan.
You have people with good sense, good jobs and good credit and you lend them money at good rates to by a house. That is a prime mortgage.
Then you have dumb people, without good jobs who have bad credit. But then the bank also decides to lend them money to buy a house but because they are a bad risk they charge more interest for the mortgage. This is a sub-prime mortgage.
I hope that was easy enough?
References :
http://en.wikipedia.org/wiki/Sub-prime_mortgage
It’s simple to answer your question. A sub-prime mortgage is a loan to borrower that is risky.
What’s complicated is all of the factors that go into determining what makes a borrower risky.
References :
A loan to a high-risk borrower – usually with considerable worse terms than a "prime" loan.
References :