At the same time that advent calendars begin to be opened, the countdown has started in earnest for Help to Buy ISAs, with just 12 months to take advantage.
Introduced in December 2015, the Help to Buy ISA was designed to help first time buyers to get onto the property ladder – however there is a deadline of the 30 November 2019 to snap one up.
The Help to Buy ISA was introduced by the Government to help first time buyers, who often struggle to save for their first home, and offers a generous 25% bonus of the amount saved in the account.
First time buyers are able to save up to £200 per calendar month in a Help to Buy ISA, which will then be boosted by the Government by 25% - so effectively £50 for every £200 saved, up to a maximum bonus of £3,000.
There is a minimum bonus amount of £400, so £1,600 must be saved in the account before any bonus can be paid. However, this does mean that a bonus could potentially be paid out after saving for just three months – a £1,000 initial opening deposit is permitted in addition to the monthly deposit limit of £200.
>> Find out more about Help to Buy ISAs
It is worth noting that the bonus is only paid on completion of the property purchase, so will not be available for the deposit that is paid on exchange of contracts.
With rates of up to 2.58% AER available, in addition to that 25% bonus, Help to Buy ISAs are certainly worth considering for those first time buyers who are looking to buy a property in the short term.
>> What are the best Help to Buy ISAs currently available?
For those who have already opened a Help to Buy ISA and are not ready to purchase just yet, there is a separate deadline by which to claim your bonus – 1 December 2030, so there is still plenty of time.
While undoubtedly popular since its inception, there are other options for those looking to purchase their first home, so you may not need to rush to get one opened.
A Lifetime ISA offers a potentially bigger overall bonus, as you are allowed to deposit up to £4,000 per year up to the age of 50 – so a bonus of up to £1,000 is potentially available each year.
And the 25% bonus is added monthly – if you make a deposit - meaning that the bonus is earning interest as well as the original deposit and, more importantly, is available when you need it – so to put towards the deposit, not just paid on completion. The really important caveat for those looking to use the money to purchase their first home is that the bonus is only available 12 months after the Lifetime ISA is opened.
In other words, you won’t be able to take advantage of the bonus if you are looking to purchase in the short term and should therefore only be considered if you are not planning to go ahead until at least a year has elapsed.
>> Find out more about Lifetime ISAs
While you would certainly argue that the interest rate paid on the account is the icing on the cake when there is a 25% bonus available, the simple fact of the matter is that the choice of Lifetime ISAs is more limited. And this lack of competition means that the rates on offer are all very similar and not as generous as the Help to Buy ISA rates.
If you are looking for a cash Lifetime ISA, there are just three providers that offer one and the top rate on offer is 1.10% AER, from Newcastle Building Society.
That said, you are able to choose between stocks and shares Lifetime ISAs and cash Lifetime ISAs, whereas with a Help to Buy ISA, your choice is limited to cash only.
>> How do Lifetime ISAs and Help to Buy ISAs compare?
And of course, don’t forget that the Lifetime ISA can also be used for those under the age of 40 who are saving for retirement and are already on the property ladder.
So, time is limited and therefore if you or a member of your family are interested in using a Help to Buy ISA for the purchase of a first home, the countdown has started.
But, don’t necessarily rush out to get one straight away – there are other options available that may be more suitable for your circumstances, particularly if that property purchase is still some way off.
As always, weigh up the options carefully and refer to our handy factsheets for more information.
If you need any further help with finding the most suitable option for your needs and circumstances, please call us on 0800 011 9705 to speak to one of our expert savings specialists.
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