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October 17, 2019
3 minute read
The Help to Buy ISA closes to new savers on 30 November this year.
If you are over 16 and have never owned a home but may want to in the future, all you need to do is open a Help to Buy ISA and deposit £1 before end November so you have the option to then save into the account and benefit from the Government’s top up for the next 10 years.
But before you dive in, you should probably compare this saving scheme with the other scheme that offers a free government bonus – the Lifetime ISA
A Help to Buy ISA allows you to save £1200 in the first month, and up to £200 a month thereafter. The government will top up your savings by 25% up to the contribution limit of £12,000. So, for every £200 you save, the government will contribute £50. This means you can earn a maximum of £3,000 from the government.
You can then use your savings plus the bonus to buy a home worth up to £250,000 outside London and £450,000 in London. With the scheme closing to new savers at the end of November, you must claim your bonus in 10 years, by 1 December 2030.
Alternatively, a Lifetime ISA allows you to save much more and in lump sums, up to £4,000 a year, and still receive a government bonus of 25%. You could earn a total of £32,000 in bonuses if you pay in the maximum £128,000 over 32 years from age 18.
You can use the money to buy your first home worth up to £450,000 anywhere in UK, or use it for retirement after you reach 60. But there is a significant penalty if you withdraw money for any reason other than buying your first home, reaching 60 or if you are terminally ill. So saving into a lifetime ISA is only an option if you can afford to lock the savings away.
For a handy table comparing both schemes at a glance, see our guide on Help to Buy vs Lifetime ISA
Yes, you can save into both ISAs if you meet the eligibility criteria. But you can only get the government bonus on one of them when you buy a home.
That means you could, for instance, use the bonus from your Help to Buy ISA to buy your first home, and your Lifetime ISA (and its bonuses) when you turn 60 for retirement.
ISAs are offered by banks and building societies. Barclays currently offer the best rate at 2.58% interest on a Help to Buy ISA account that can be opened with £1, while Nationwide, NatWest and Virgin Money all pay 2.5% interest.
The best Lifetime ISA rate is currently with Moneybox at 1.4%. But shop around for the best deal.
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