Prime Mortgages are generally provided by major Financial Institutions
such as Banks and Monoline Lenders with an appetite for strong borrowers.
Benefits to the strong borrowers can include preferred mortgage rates
without charging lending fees. The underwriting guidelines is also designed to
ensure borrowers have adequate positive cash flow after the acquisition of the mortgage.
Sub Prime Lenders
When a mortgage applicant does not meet the major Financial Institutions and Banks' underwriting guidelines, there are a number of alternative Mortgage Lenders who will consider providing a solution usually with slightly higher interest rates and some cases will charge a succession fee. These Sub Prime lenders can provide a short term solution for mortgage applicants in order for the applicants to improve their financial affairs and with proper debt planning, mortgagees will have the chance to reapply with Prime Lenders.
Private Lenders are usually a Group of Investors or an Individual Investor who is willing to loan their personal funds to mortgage applicants. These lenders are willing to take on a higher risk which results in higher succession fees and interest rates.
Private lender generally base their decision on the location and well being of the property they will use as collateral/security for the loan in addition to the borrower's plan to repay in full within a short period.