Decision time for Isas
FIVE-MINUTE GUIDE TO... CLOSURE OF THE HELP TO BUY ISA
THE Help to Buy Isa has enabled almost 200,000 people get on the property ladder but time is running out to take advantage of it because the scheme closes at the end of next month.
The savings plan was launched in December 2015 to help first-time buyers aged 16 and over save a deposit for a home, by giving them a governmentfunded 25 per cent savings top up.
It closes on November 30, although existing savers can continue and have until December 2030 to claim their bonus. Should you race to beat the deadline?
HELPING HAND
With the Help to Buy Isa, savers can pay in up to £1,200 in the first month, then a maximum £200 a month thereafter. It will take five years to pay in the maximum £12,000 to secure a bonus worth £3,000 (couples can get £6,000).
You can use it to buy a UK home worth up to £250,000, or £450,000 in London, but cannot buy a second home or investment property.
Matthew Firth, managing director at Granville Developments, said the scheme has helped young people keep up with spiralling house prices despite stagnating earnings.they now face a tough choice – rush to open a Help to Buy Isa or opt for its successor, the Lifetime Isa.
The Lifetime Isa is open to those aged between 18 and 40, and is more generous overall because savers can pay in up to £4,000 a year until age 50, and get a
25 per cent government bonus worth up to £1,000 a year.the maximum you could get is £32,000, which can be put towards UK properties up to £450,000, with a mortgage covering the rest.
Otherwise you can use it to save for later life instead, something you cannot do with a Help to Buy Isa, where the bonus is only paid when you buy your first home.
LIFETIME CHOICE
Firth said the Help to Buy Isa may appeal more to first-time buyers who can only afford to make smaller, regular savings, and he urged them to act now.
“As it is a form of cash Isa, it promises to deliver a reliable return, but you need to be in it for the long haul to claim a larger payout,” he said.
David Hollingworth, associate director at L&C Mortgages, said the Lifetime Isa may appeal to those who can afford to save more than £200 a month or pay in lump sums. “Although you cannot use it to buy a property in the first 12 months,” he added.
Just remember there is a 25 per cent penalty if you withdraw the money before age 60 for any other reason than buying a first home. Lifetime Isas let you invest in stocks and shares, as well as cash. Hollingworth added. “They will attract those happy to take on added risk.”
However, those who prefer cash will have a greater choice of accounts with the Help to Buy Isa. If you or a younger family member is looking to buy their first home, check out both schemes now because from December your choice will be limited to just one, the Lifetime Isa.