Under Help to Buy, borrowers are given a loan of up to 20% the value of a newly built home
Thousands of homeowners who have bought properties using the Help to Buy scheme will see their loan repayments skyrocket from next month.
Under Help to Buy, borrowers are given a loan of up to 20 per cent of the value of a newly built home or 40 per cent in London by the Government.
The buyer is then able to get a mortgage with just a 5 per cent deposit.
The loans are interest free for five years. After this interest is charged at a rate of 1.75 per cent of the loan — in addition to their mortgage repayments.
The first swathe of buyers — thought to be around 2,000 borrowers — who took out Help to Buy loans five years ago will be hit with the extra charges from April.
It means that someone with a £300,000 property who took the 20 per cent loan would have to pay an extra £1,050 in the first year.
These charges will increase each year in line with the Retail Prices Index, plus 1 per cent.
Think tank the Resolution Foundation warns that the fees are ‘a ticking timebomb’ for families who signed up to these loans.
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