A sub prime mortgage is a mortgage that is offered to someone with less than perfect credit, either in the past or at present. A conventional, or prime loan will not be available to someone with a credit score of less than 620. Sub prime mortgages were created to target the numerous people who wanted to be home owners, but due to poor credit, or no credit were not able to get a prime bank loan. The banks saw this as a way to create money in the long run for themselves, because of the high incidence of default as interest rates rose and people were not able to make their mortgage payment. A sub prime mortgage rate of interest is considerably higher than a prime rate, and is subject to going up as rates change, as opposed to a 'fixed' rate, where the rate of interest stays the same for the life of the loan. The people with a lower credit score were targeted by the banks as an easy way for the bank to eventually make money. Yes, the bank would be happy to extend a loan to these people, but at whose expense? The banks were not doing anyone any favors by doing this. There was money to be made, and lots of it, and banks took full advantage of this fact. People who had a sub prime mortgage eventually found that as the interest rates rose, they were not able to keep up their payments and therefore had to default on the loan. They lost their house, and the bank gained another way to make money. If you are applying for a mortgage, make sure you ask whether or not you are getting a prime or a sub prime mortgage, and save yourself a lot of headaches.