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Subprime Mortgages

What types of mortgage products are considered subprime – and do you need a subprime mortgage or are there more suitable borrowing options available?

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-14
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What Is a Subprime Mortgage?

Business finance broker works with thousands of clients seeking subprime mortgages; usually, because they find themselves unable to qualify for mainstream or high street mortgages and would like to purchase a property.

This can be due to any number of reasons:

  • Having complicated income streams.
  • Poor credit history, or no previous credit rating.
  • Non-standard personal circumstances or borrowing requirements.

If any of these scenarios apply to you, or you feel unable to secure the mortgage you need, Revolution Brokers can help.

We work with a vast network of specialist lenders and can assist with securing competitive mortgage lending in any set of circumstances.

Here we will explain a little more about subprime mortgages, what they mean, and when they might be the most appealing option.

For personal support and tailored advice, give us a call on 0330 304 3040 or drop us a message at [email protected].

What Is a Subprime Mortgage?

Subprime means something outside of the general mortgages offered on the high street.

This type of mortgage is an option for property buyers who cannot secure mortgage lending. Usually, because of a particularly high-risk factor, or having issues with their credit history.

Most subprime mortgages will be offered at a higher interest rate than on the mainstream market and may require a larger deposit.

The best way to secure a subprime mortgage from a specialist lender is to work with a whole-of-market broker such as Revolution Finance.

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Based on your yearly income,
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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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Do I Need a Subprime Mortgage?

There are multiple reasons why you might need a subprime mortgage, due to falling outside of the general eligibility criteria.

This could include:

  • Having a low credit score.
  • Having been bankrupt.
  • Adverse credit history - including CCJs, defaults or mortgage arrears.
  • Having not had any borrowing before, and therefore having no credit history.
  • Multiple personal circumstances that generate a higher risk.

Many of our clients seek a subprime mortgage due to minor issues, which tip them into a subprime risk profile category - such as:

  • Not being registered on the Electoral Roll.
  • Having a lot of credit facilities.
  • Having missed some payments.
  • A sudden drop in income, leading to short-term defaults.
  • Divorce or relationship separation resulting in financial blips.

It is not uncommon to experience short-term changes to your credit rating or to have suffered through a challenging financial period. Still, it can be frustrating that this impacts your ability to secure a mortgage in the future.

Revolution Brokers recognise that at these times you may need borrowing more than ever - for example, needing to purchase a new home following a separation.

We work diligently to find you the lending you need to be able to move forward.

What Deposit Will I Need for a Subprime Mortgage?

Typically, a subprime mortgage will have a lower loan-to-value (LTV) ratio; this means your deposit will need to be higher than usual as the risk factors are higher.

Deposits tend to be around 25-30% of the mortgage value, but Revolution Brokers work with lenders who can accept lower deposits of about 20% for lower-risk applications.

For general residential mortgages through the mainstream market, average deposits required are around 5-15% in comparison.

What Interest Rates Should I Expect on a UK Subprime Mortgage?

As with higher deposits, subprime mortgages will offer slightly higher interest rates. However, over the last few years, we have seen these become much closer to the general market as more lenders enter the subprime sector.

There is, therefore, a much broader range of rates and mortgage options now available.

The interest rate you are offered depends on multiple circumstances; such as how severe your credit issues are, and how long ago they occurred.

Generally, we see rates of around:

  • 4.5-5.5% on average.
  • 2.5% from the most competitive subprime lenders.
  • 8% and above for the riskiest mortgage lending.

These rates are very much indicative, so for an accurate quote and to identify what bracket your application might fall into, give the Revolution team a call on 0330 304 3040.

Credit ratings are, of course, only one of several factors a subprime mortgage lender will consider. Other considerations include:

  • Your income and employment type
  • Your age
  • Your location
  • The property you wish to buy

Is There an Alternative to a Subprime Mortgage?

There certainly are. If you don't have the higher deposit required for a subprime mortgage or are keen to avoid the higher interest rates, there are steps you can take to make your application more acceptable on the non-subprime market.

  1. Use a guarantor. Having somebody with good credit guarantee your application can make it much more likely that a mortgage lender will accept your application.
  2. Put down a bigger deposit. The lower the LTV ratio, the lower the risk and the more competitive the interest rates you will be offered on a subprime mortgage.
  3. Research the market. New mortgages come onto the market all the time, and likewise, your credit issues may be close to expiry. If you have, say, 12 months left until an adverse credit activity expires, it can be very beneficial to wait a year, and then apply when you fall outside of the subprime criteria.
  4. Improve your credit score. By keeping up to date with lending, or taking out borrowing if you have no credit history, and registered on the Electoral Roll, you can proactively take steps to improve your credit file.
  5. Offer additional security. As well as a deposit, you can offer other assets (such as another property) to act as security against your mortgage and lower your risk profile.

Why Don't You Have a Subprime Mortgage Calculator?

Most subprime lenders work exclusively through brokers such as Revolution Finance. Therefore, it is challenging to publish a subprime mortgage calculator that would produce indicative results.

If you have an idea about the rates on offer from a subprime lender, you can use our standard mortgage calculators to get an idea of the monthly repayment value.

Subprime mortgages are always bespoke to the applicant, and so it is essential to work with a professional broker who can negotiate the terms and lending on your behalf.

How Do I Find a Subprime Mortgage Lender?

Very few subprime lenders deal directly with applicants, have a high street presence or a public access website - most liaise with their network of brokers to identify applicants who fit their lending criteria.

Some mainstream mortgage lenders do offer 'bad credit mortgages' such as:

  • Skipton, who do not offer subprime mortgages as a product, but will consider applicants with a bankruptcy history provided it was at least four years ago.
  • Barclays & Natwest will usually refuse applicants who have been bankrupt in the last six years.
  • Halifax does not offer subprime mortgages, but can sometimes approve applicants with an IVA.
  • Post Office Bank will reject applicants with an IVA but may consider those with a CCJ on their credit file.

Working with Revolution Brokers means being able to identify the right subprime mortgage lenders who will be happy to lend to you, but also negotiating the most favourable terms and applying for the most competitive mortgage, rather than to any lender who will consider your application.

Professional Support with a Subprime Mortgage Application

Revolution Brokers work with a vast network of subprime mortgage lenders.

Not only do we identify the right lenders to apply to, but also work on your behalf to ensure you achieve the most advantageous rates and terms available.

For support with securing subprime mortgage lending, give us a call on 0330 304 3040 or send an email to [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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