What is one of the main disadvantages of a sub-prime mortgage?

The main disadvantage of a sub-prime mortgage is the possibility of predatory lending. Sub-prime mortgages are typically offered to borrowers who have lower credit scores or are perceived as higher risk. Because of this, lenders may impose more aggressive and exploitative terms which can lead to predatory practices. This includes high fees, excessive interest rates, and loan structures that can trap borrowers in a cycle of debt, making it difficult for them to repay the loan.

Understanding this aspect is crucial for prospective borrowers, as it helps them navigate the potential pitfalls of sub-prime lending. In many cases, the terms associated with sub-prime mortgages can lead to financial instability and even foreclosure, making awareness about predatory lending practices vital for anyone considering this type of finance.