Definition
A subprime mortgage loan is a home loan made to a borrower with weaker credit history or higher default risk, often resulting in higher interest rates or less favorable terms than prime mortgages.
Why It Matters
Subprime lending can expand homeownership access but can also increase foreclosure risk and financial system stress if underwriting is poor.
Example
A borrower with a low credit score receives a mortgage with a higher rate than typical borrowers.