Specialist mortgages are available from light sub-prime
(an industry term which describes mortgages for people who fall outside
normal lending criteria due to past financial problems) through to heavy adverse credit for those with serious credit problems.
Levels of sub-prime
Sub-prime categories differ from lender to lender, but below is a rundown of the categories that are usually available. As a rule of thumb, the lighter sub-prime categories have lower rates which get higher as the lever of bad credit increases.
Near prime – also known as super light, extra light and ultra light
This category is extremely new, with lenders just launching near prime products this year. A typical customer would be someone who has just slipped out of prime lending because of a credit problem, but whose credit history is not bad enough for them to fall into the light sub-prime category. For example, they may have very low level CCJs or be in minor arrears on an existing mortgage. Rates are very close to mainstream prime rates.
Light sub-prime is for those borrowers with minor adverse credit – as a guide this could be CCJs up to £3,000 or having missed a number of existing mortgage payments. Again, light sub-prime rates are reasonably close to prime mortgage prices.