Bad credit mortgages are the rough and ready name for mortgages that are just as likely to be found under a number of other guises, including impaired or adverse credit, sub prime or full status mortgages. Between them, they account for a pretty large section of the mortgage market.

It used to be the case that if you didn't have a perfect credit record you couldn't get a mortgage from a high street lender. But now, the lending market has become so diverse that there are products to fit every credit profile. Very distinct sectors, rare to find lenders that cater for all of them equally.

Today's borrowers can choose from a large number of special products that are aimed specifically at those people with some form of impaired credit history. These mortgages do not differ vastly from other mainstream mortgages - you can usually find discounted, fixed, capped and even base rate tracker bad credit mortgages.

However, there are certain key differences in comparison to standard mortgages:

Impaired credit mortgages have historically offered rates of interest that were significantly higher than normal mainstream mortgages, often charging a premium of one, two or even three percent more than mainstream conforming mortgages. Although increasing price competition amongst lenders has means that interest rates among sub prime mortgages are getting ever-closer to the Standard Variable Rates offered to mainstream borrowers, there is still a slight premium, depending on the particular product and the degree of bad credit that is acceptable to the lender. It is also almost impossible to find discounted deals and introductory offers that are as competitive as those offered to mainstream borrowers.

The approach to underwriting on the part of the lender is different. Rather than use an automated credit scoring system, most lenders that service this sector of the market adopt a case-by-case approach. A non-conforming lender is more likely to lend to an individual, but is likely to be rather more conservative in terms of the amount that they are willing to advance.

As well as being less willing to loan large sums of money, bad-credit lenders are usually more demanding in terms of the size of the deposit you are required to contribute to the asking price of your chosen property. Many impaired credit lenders are not willing to advance more than 75% of the property value.

A final feature of many impaired credit mortgages, though one that is not by any stretch unique to them, is the fact that there can be extremely severe early redemption penalties. These can be more onerous than with mainstream mortgages both in the size of the penalty that will apply and in terms of the length of time for which the penalty period lasts.