Should you get a Help to Buy ISA before it’s too late?

19th August 2019

Family carrying things up a staircase

You may or may not know that the Help to Buy ISA is coming to an end in November 2019.

The government scheme lets you save up to £1,200 in the first month, and up to £200 every month afterwards, with the state topping up your savings with a 25% bonus.

First-time buyers will receive a maximum bonus of £3,000, which is a great help towards that elusive deposit. You can use the savings from your ISA to buy a home worth up to £250,000 (or £450,000 in London).

The good news is that there’s still time to apply for one - up until 30 November in fact. And it may well be worth considering, as you can keep your ISA open until November 2029 when accounts will close to additional contributions.

Here are the ins and outs to help you decide if a Help to Buy ISA is right for you.

What’s replacing the Help to Buy ISA?

The Lifetime ISA (LISA) is another government scheme designed to help first-time buyers save for their home.

You can save up to a maximum of £4,000 in your account a year, and the government will top it up with a bonus of 25%. Depending on your provider, this will be paid into your account approximately four to eight weeks after you make your investment.

As the name suggests, this is a longer-term savings scheme and you can keep it until you’re 50.

Help to Buy vs LISA

With a LISA, you can save as much as £4,000 each tax year, up to a maximum bonus of £1,000.

With a Help to Buy ISA, you can save £1,200 in the first month and £200 a month afterwards. So, in the first year, you can save £3,400 and earn a maximum bonus of £850.

If you live outside London, you can use your Help to Buy ISA savings on homes worth up to £250,000. If you’re looking to buy in the capital or Greater London area, then this goes up to £450,000.

You have to wait a year before you can use your LISA savings. With Help to Buy, you can use your funds when you’ve saved £1,600 or more - so in three months’ time, in theory.

In most cases, you can use your LISA money for your deposit. With a Help to Buy ISA, your money’s paid out on completion of the sale, so you can only use it towards your mortgage, not as a deposit.

Should you get a Help to Buy ISA while you can?

It’s certainly worth considering, even if you aren’t ready to buy yet.

You can open your account with as little as £1, and then start paying in more money when you can.

“The Help to Buy ISA is a great way to boost your savings before buying your first home,” said Joe Gaytten, a Trussle Mortgage Adviser.

“But there are plenty of benefits to the Lifetime ISA as well, including the option to use your funds as part of your deposit.”

Remember, you won’t be able to take out a Help to Buy ISA after November this year, so get your skates on if you think it’s right for you. And if you’re still not sure what to do, speak to a mortgage broker and they’ll talk you through what’s best for your situation.

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