The Help to Buy ISA scheme closes on 30 November 2019. But it could still help you buy your home if you hurry.
We look at the HISA, and at an alternative that could potentially work out even better.
What is the Help to buy ISA?
The Help to buy ISA – or HISA – is a government initiative designed to help first time homebuyers. It is a type of ISA, which means that it offers the usual ISA tax advantages. But it could offer bonuses of 25% paid by the government on everything you save, up to the annual limit, which works out at £3,400 in the first year, and £200 a month, or £2,400 annually after that. If you save £1,600 you get the minimum bonus of £400, and if you save £12,000 you enjoy the maximum £3,000 bonus.
Free money from the government is a rare thing, and at Continuum, we have helped many people take full advantage of the HISA to build up their savings before buying their first home. Getting the best interest rate is essential, which is where our knowledge of the market can be particularly important.
But things are not quite as simple as they might be. Unlike other ISAs, you can only use the HISA to buy a first property. Infuriatingly, you cannot actually use the bonus toward the deposit due at exchange of contracts, which is what most people want to save for when they are buying their first home.
Now the HISA is being withdrawn. The Help to Buy ISA scheme closes on 30 November 2019, although the funds invested are safe and the bonus can be used up until 1 December 2030.
What should you do?
If you are planning on buying your first home in the near future, it still might be possible to get some government help with a HISA – if you act now and save at least £1,600 to get the 25% bonus.
You would need to pay in £1,200 this month, followed by at least £80 each month until the end of November to make £1600 – and a bonus of £400.
What’s more, if you’re a first-time buyer, buying with another first-time buyer, you can both open a HISA. So, together, you can save up to £400 a month and double the bonus when the time comes.
But this is not the only way for you to get government help to save.
The Lifetime ISA – or LISA
The HISA proved the unsurprising fact that people were keen to enjoy a 25% bonus, but that they were less keen on the HISA restrictions.
The government introduced the Lifetime ISA, or LISA as a more versatile alternative. Like the HISA, it is an ISA with tax-exempt status, and government bonuses to make saving much more rewarding. Unlike the HISA, it will let you go on saving. You don’t have to use it to help buy your first home – you can keep it until you are ready to retire, which can make it a worthwhile way to supplement your pension.
HISA or LISA?
Working out whether you should look at grabbing a last chance HISA, opt for a LISA – or choose another type of ISA entirely – will depend on your circumstances.
At Continuum, we can sit down with you to look at the possibilities of each one, provide a projection of which will leave you best off, and even introduce some alternatives like split ISA arrangements.
But if the HISA is going to be the best choice for you and your plans, you need to arrange it now to secure the bonus which makes it all worthwhile.
A call to Continuum today could help you avoid missing out.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of an investment can go down as well as up. Investors could get back less than the amount invested.
Equity Investments do not include the same security of capital which is afforded with a deposit account.
By incurring a Lifetime ISA Government withdrawal charge you may get back less than you paid in.
By saving in a Lifetime ISA instead of a qualifying pension scheme you could lose contributions by your employer, if any.
Saving in a Lifetime ISA may affect your entitlement to current and future means tested benefits.
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Book an initial consultation with one of our independent financial advisers or call us on 0345 643 0770 if you would like to discuss further.
