First-time buyers have ONE MONTH to open a Help to Buy Isa before scheme closes
The government scheme – which offers savers a 25 per cent bonus to help them get on the property ladder – is closing on November 30.
That means you just over one month to open your Help to Buy Isa account before the scheme closes forever.
It will be replaced by the Lifetime Isa, which can be opened by Brits aged between 18 and 39 to save towards a home or their retirement.
Here’s what you need to know about the Help to Buy scheme, how to apply and why it is being scrapped.
What is a Help to Buy Isa?
The government-backed Help to Buy Isa tops up your savings help you buy your first home.
Your savings are boosted by 25 per cent, so if you deposit £200 the government will add £50 to your savings, up to a maximum total top up of £3,000.
You can also earn interest on top of whatever you save – but rates vary depending on your bank.
You can deposit up to £1,200 in the first month, and after that the maximum you can save each month is £200.
You’ll need to save at least £1,600 before the government will start topping up your savings.
Help to Buy Isas are offered by many different high street banks and building societies – and they can be opened with just £1.
The cash never actually reaches your account but instead goes straight to your solicitors and is tied up in the purchase transaction.
It must be used towards your deposit or to cover the legal fees, such as solicitor’s charges or stamp duty.
The Help to Buy scheme has attracted controversy, with some claiming the scheme only benefits the rich and has driven up house prices.
Official figures showed that the average earnings of someone who claimed the bonus earned £55,000 a year.
Why was the Help to Buy Isa scrapped and what is replacing it?
The government has decided to scrap the scheme in favour of the Lifetime Isa (Lisa) which lets you save money towards your first home or retirement.
You can only open a Help to Buy Isa until November 30, 2019, and if you’ve already got an account you can keep saving into it until November 30, 2029.
Once the Help to Buy scheme closes, only the Lisa scheme will be available to help first-time buys.
Brits between the age of 18 and 39 can save up to £4,000 a year into the Lisa, either as a lump sum or by putting in cash when you can.
The government will then add a 25 per cent bonus on top – so if you save the full £4,000 a year you’ll have £5,000.
The Lisa is only available up to the age of 39, but you can deposit in it until you’re 50, and saving the maximum amount over 32 years would net you £32,000 of free cash.
The money can be used either towards a first home worth under £450,000 (once a Lisa has been held for 12 months or more), or towards retirement once you’re over the age of 60.
Should I get a Help to Buy Isa or a Lisa?
Both the Help to Buy Isa and the Lisa give you 25 per cent back on your savings.
But, you can save up to £4,000 in the first year with the Lisa, compared to just £3,400 with the Help to Buy Isa.
What help is out there for first-time buyers?
Getting on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
The Lisa also lets you deposit your savings in lump sums, rather than having a £200 monthly deposit limit.
Not many banks and building societies offer the Lisa though, so the interest rates on them aren’t great – you’ll earn more interest on a Help to Buy Isa.
Saving the maximum amount in a Lisa for 32 years would net you £32,000 of free government cash, which is more than you can get under the Help to Buy Isa.
Saving with a Lisa could get you £32,000 free cash, compared to just £3,000 under the Help to Buy Isa.
Source: The Sun