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Should I still apply for a Help to Buy ISA?

View profile for Zoe Fellows
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With Help to Buy ISAs set to be shut down on November 30th 2019, you may be wondering if it is still worth opening one. Here Zoe Fellows, Associate Solicitor in our Residential Conveyancing department, explains why Help to Buy ISAs are still a good way to get your foot in the door as a first time buyer, and the difference between a Help to Buy ISA and a Lifetime ISA.

What is a Help to Buy ISA?

Launched at the end of 2015, Help to Buy ISAs are a scheme designed by the Government to help first time buyers save up for a deposit on their first home. As a first time buyer opening one of these ISAs, the Government will contribute 25% extra to your savings up to the amount of £3,000 on savings of £12,000, all tax-free. You can now open a Help to Buy ISA with as little as £1, but will need a minimum of £1,600 before the Government will contribute.

Eligibility for a Help to Buy ISA depends on several things, such as:

  • You must be a first time buyer
  • You must be aged 16 or over
  • It can only be used on a property worth up to £250,000 or £450,000 in London
  • You can use a Help to Buy ISA with any mortgage, not just a Help to Buy Mortgage

Should I still open a Help to Buy ISA if they are ending?

Help to Buy ISAs are set to close to new applications by 30th November 2019, but you will be able to save until 30th November 2029 and they are still set to pay out until December 2030, providing the Government doesn’t change the rules before then.

Due to these timescales, even if you aren’t sure that you will want to buy a property, it would still be prudent to open one. You will have a good amount of time to save and even if you decide not use that money for a deposit, you can withdraw it from the ISA at any time; you’ll just lose the bonus. It will be tax free and you’ll still get the interest you’re due to receive.

Depending on your provider, you will also be able to make partial withdrawals.  By doing this, you will lose the bonus for the amount withdrawn, but you can still keep contributing after the fact and receive the bonus for whatever is in the account when you need it for a deposit.

Another benefit of a Help to Buy ISA is that it is a product for individuals. This means if you and a partner are both first time buyers, you can both open a Help to Buy ISA and save £400 a month and double the bonus.

What’s the difference between a Help to Buy ISA and a Lifetime ISA?

The Lifetime ISA is the initiative that is set to replace the Help to Buy ISA. While a Help to Buy ISA is to help first time buyers onto the property ladder, a LIFETIME ISA is designed to do that as well as help you save for your retirement, and can be opened by anyone aged 18 to 39.

With a LIFETIME ISA you can save a higher amount annually, up to £4,000, whereas you can only save up £2,400 with a Help to Buy ISA. The bonus is also paid differently with a LIFETIME ISA and is deposited monthly as opposed to when you purchase a property with a Help to Buy ISA. While this may sound more appealing, you need to have had a LIFETIME ISA for a year before you can use it to buy a home and there is also a fine for early withdrawal.

If you have a Help to Buy ISA and are looking to use it towards your first property you can contact Zoe on 01329 222079 or email zoefellows@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.