Which type of mortgage typically provides less favorable terms for the borrower?

A subprime mortgage typically provides less favorable terms for the borrower primarily because it is designed for individuals with poor credit histories or low credit scores who may have difficulty qualifying for conventional financing. As a result, lenders impose higher interest rates and more stringent terms to compensate for the increased risk of default associated with these borrowers.

Subprime loans also often include features that can lead to additional costs for borrowers, such as prepayment penalties or adjustable rates that can increase over time. This can create a financial burden and greater monthly payments for borrowers compared to standard or prime mortgages, which usually offer better interest rates and favorable terms for financially stable borrowers.

Other types of mortgages, such as fixed-rate and adjustable-rate mortgages, while they can come with their own risks or advantages depending on the borrower’s personal financial situation and market conditions, are generally not classified as offering unfavorable terms in the same way that subprime mortgages do. A standard mortgage typically refers to those with prime lending terms, which are favorable to borrowers as they generally offer better rates and lower associated fees.