The 30th November is the deadline for a new Help to Buy ISAs to be opened. Therefore, if you are over 16 and aim to buy your own home in the future, you need to open one now. An ISA can be opened for as little as £1 but will enable you to make contributions up until 2029.
The Benefits
The Help to Buy ISA allows savers to claim a Government bonus of 25% on monthly savings of up to £200 towards their first home. The scheme entitles you to a maximum governmental contribution of £3,000 on £12,000 worth of savings. Should you be buying with another first time buyer, you could potentially have an extra £6,000 to put towards your first home.
Who Qualifies?
To open an Help to Buy ISA you just need to be 16 or older and a future first-time buyer. A first-time buyer is defined as someone who’s never owned or part-owned a property anywhere worldwide. As ISAs are individual products, you can qualify even if you’re buying with someone who’s owned before.
Help to Buy vs Lifetime ISAs
An alternative to the Help to Buy ISA is a Lifetime ISA. The Lifetime ISA acts in the same way and it is possible to open both ISA types, however you will only receive the 25% bonus on one of the ISAs. Here are the differences you should consider:
- The potential annual savings on a Lifetime ISA are greater than those on the Help to Buy ISA. A Lifetime ISA will allow you to save up to £4,000 each year, compared to the £2,400 limit on the Help to Buy ISA. A initial start up contribution of £1,000 is allowed on the Help to Buy ISA enabling first year savings of up to £3,400.
- With a lifetime ISA you will be able to purchase a property valued up to £450,000, a significant difference to the £250,000 limit on the Help to Buy ISA (unless you live in London).
- The minimum period for the ownership of the ISA does favour the Help to Buy ISA. A minimum period of 3 months is required on the Help to Buy ISA, contrasting to the 12 months required for the Lifetime ISA. Depending on your time frame for purchasing your first house, the minimum period could affect your choice of ISA.
- Help to Buy ISAs currently pay a higher interest rate than most Lifetime ISAs. On face value this may seem like the Help to Buy ISA is more attractive due to the interest rates, however the 25% government bonus more than makes up for the lower interest rates.
- Withdrawal from a Lifetime ISA for any reason other than purchasing your first home or after becoming 60 does have a consequence. There is an equivalent loss of 6.25% on any contributions withdrawn early.
Don’t Miss Out
Considering purchasing your first home in the future? It is worth opening a Help to Buy ISA just in case before 30th November. Whilst there is no deadline to the Lifetime ISA, the requirement of 12 months ownership means you should open it as soon as possible. £1 each is all it takes to open both ISAs and you can decide which is better for you at a later date.
If you’re ready to start saving, and want a Help to Buy ISA, then as you can contribute up to £1,200 in the first month, and only £200 per month after, it’s best to wait until you’ve the max amount to open it, as long as it’s before 30 Nov.
