The government’s Help to Buy: ISA scheme was launched on 1st December 2015 to help first-time buyers save for a deposit on their own home.
The Help to Buy ISA allows first-time buyers to save £200 a month in the account and rewards them with a 25% top up from the government, with a maximum top up of £3,000.
This means that for every £200 you save in the Help to Buy ISA, the government will give you £50. In order to get the maximum government bonus of £3,000, you need to save £12,000 in the Help to Buy ISA.
However, the Help to Buy ISA deadline is looming so if you’ve never owned a home before and you haven’t yet opened one of these rewarding ISAs, read on!
To learn more about buying your first home, take a look at Can’t Swing a Cat’s first time buyer blog section.
When is the last date I can open a Help to Buy ISA?
The 30th November 2019 is the last day you can open a Help to Buy ISA.
After this date, you’ll only be able to open a Lifetime ISA. While the Lifetime ISA offers some benefits over the Help to Buy ISA, many people will find that the Help to Buy ISA is more suitable for them.
If you open a Help to Buy ISA before the deadline, you’ll be able to continue placing money in it until 30 November 2029.
What are the key differences between the Help to Buy ISA and the Lifetime ISA?
How much can I deposit in each ISA?
In the month that you open your Help to Buy ISA, you can place £1,200 in it. After that you can only place £200 a month in. This means in year one there’s a maximum bonus of £850 and for each year after that, a maximum bonus of £600 a year.
With the Lifetime ISA, however, you can place £4,000 a year in it and benefit from a maximum annual bonus of £1,000.
On this basis, the Lifetime ISA is more generous. However, if you can’t afford to save more than £200 a month anyway, you may be decide the Help to Buy ISA is better for you based on info included below.
Are there any age limits?
You can open a Help to Buy ISA as long as you’re aged 16 or above.
You can open a Lifetime ISA as long as you’re aged 18-40.
Can I use these ISAs for stocks and shares?
The Help to Buy ISA is cash only.
The Lifetime ISA can be cash or stocks and shares.
If you’re using the Lifetime ISA with the hope of buying a home in the next few years, it might be wise to opt for cash instead of stocks and shares. The last thing you want is to see a fall in the value of your house deposit.
Whereas using a stocks and shares Lifetime ISA for retirement makes more sense because your investments will have longer to recover.
Are there any restrictions on what type of home I can buy?
If you open the Help to Buy ISA, when you come to buy a home, the property must be worth less than £250,000 if it’s outside of London. If it’s inside London, it has to be worth less than £450,000.
If you use the Lifetime ISA, however, there’s a £450,000 limit everywhere.
How quickly can I use each ISA to buy a home?
With the Help to Buy ISA, you can access the government bonus to buy a property once you have £1,600 in the account. Therefore, if you place £1,200 in it in month one and £200 a month in each month afterwards, you could use your money and the government’s bonus to buy a home after just 3 months! Of course, you’ll need additional savings elsewhere. Aint nobody buying a house with a £1,600 deposit 😉
With the Lifetime ISA, you need to have the account open for a full year before you can use it towards a home.
If you transfer money from the Help to Buy ISA to the Lifetime ISA, you’re then ‘locked into’ the Lifetime ISA for a full year, even if you had the Help to Buy ISA for several months.
