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| Subprime mortgage | Bank mortgage | Home equity loan | |
|---|---|---|---|
| Rate range | 4.04 - 16% APR | 4.09 - 34.99% APR | |
| Interest charged on | The full amount, amortized | The full amount, amortized | The full amount from day one |
| Repayment | Fixed payments, often shorter terms | Fixed or variable payments over the amortization | Fixed instalments, registered against the home |
| Re-borrow without reapplying | No | No | No |
| Best when | Credit or income documentation blocks a bank approval | You qualify on income and credit at a bank or monoline | A large cost and meaningful equity in your home |
| Watch out for | Higher rates and lender fees than prime | Qualification is strictest here | Setup and legal costs; your home secures the debt |
Lending from B-lenders and private lenders for borrowers who do not meet bank criteria, usually because of credit history, self-employment income, or an unconventional property. Rates run above bank pricing and terms are shorter, commonly one to two years, designed as a bridge rather than a permanent arrangement.
More than with a bank. Expect 20% or more with a B-lender and often 25% to 35% with a private lender, since equity is the lender's protection where credit or income documentation is weaker.
Treat the alternative mortgage as a term with an exit plan: repair credit, document income consistently, and pay on time throughout. Most borrowers move to conventional financing within two to three years. Agreeing that plan with your broker at the outset matters more than the rate you start on.
