What is the Definition of a Subprime Mortgage?

A Subprime mortgage is a type of mortgage used by borrowers with low credit ratings, borrowers who are considered risky by the lenders. They don’t usually qualify for a conventional loan with lower rates for a variety of reasons, such as limited debt experience, excessive debt, a history of missed payments, failure to pay debts, and recorded bankruptcies. Because they have damaged credit or no credit history they are considered risky by lending agencies, and for this reason lenders charge a higher interest rate on subprime loans. The borrower is subprime, so the interest rate is higher.