What is a High Risk Mortgage?

When you take out a mortgage, your lender will need to take a number of factors into account before deciding how much interest to charge on your loan. Lenders have to decide how much of a risk you are based on your previous financial history. This is known as risk-based pricing. A high-risk mortgage would be given to someone with a poor financial record.


Why might I be given a high-risk mortgage?


How would a high-risk mortgage affect me?

A high-risk mortgage would require a higher level of interest to be paid on your loan. This is because lenders want to be compensated for granting someone who is considered “higher risk” with a large loan.

Example –

Peter and James both apply to take out a mortgage of £200,000.



Peter would appear less risky to a lender because he has a good credit score, a healthy DTI and is able to place a decent down payment on his mortgage.

James, on the other hand, would appear more risky to a lender due to his poor credit score, high DTI and lower down payment. As a result, John would be given a high-risk mortgage and pay a larger amount of interest on his loan than Peter.


How can I avoid being given a high-risk mortgage?

Obviously, having a high interest rate on your mortgage is not ideal. Here are three ways in which you can improve your chances of not being given a high-risk mortgage;


If you think a high-risk mortgage with a large interest rate may apply to you, it’s important to think about your current financial profile before choosing to take out a mortgage. Speak to a mortgage expert to make sure you go about getting a mortgage in the best way possible.

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