One million Britons made this massive mistake when buying a home

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upside down house

Reuters

A labourer works at an upside-down house under construction.

Around one million people in Briton made a massive mistake when buying their home - they took out an interest only mortgage and had no plan on how to pay the banks back for their property.

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The Citizens Advice Bureau, which gives free, confidential, and impartial advice over issues such as debts, welfare, housing, and consumer rights, warned that 934,000 home owners had no plan on how they would pay off their massive homeowner loans.

This means that when it comes to the end of their loan repayment period, they could be forced to sell their home or have it repossessed by the lenders themselves.

"People buy a home for stability, but interest-only mortgages have forced many into a financial black hole," said Gillian Guy, CEO of Citizens Advice Bureau in a statement to the Daily Mail and BBC. The group estimate that the first round of people that face losing their homes when it comes to the end of their mortgage repayment period will be between 2017 and 2018.

Prior to rules being tightened in 2012, it was very easy to get an interest-only mortgage. That means that your monthly mortgage payment would only cover the interest on your loan and no capital payments would be made. So in other words, you wouldn't own your home at the end of the payment period, unless you somehow had a few hundred grand spare.

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Citizens Advice Bureau warned that without a plan to pay back the mortgage at the end of the loan period, people will be forced to sell their home to cover the costs. This is also a gamble because they would have to make sure that the price they are selling the property for is equal to or more than the loan they took out.

The charity estimated that 3.3 million people in Briton have an interest only mortgage but around a third do not have a capital repayment plan. It said its polling was more accurate than the Financial Conduct Authority which calculated a much smaller number at 2.6 million.