Great Britain

Help to Buy Isa 2019 – last chance to apply as banks start closing applications for new accounts

TIME is running out for first-time buyers to open a Help to Buy Isa and get up to £3,000 free cash.

The government scheme - which offers savers a 25 per cent bonus to help them get on the property ladder - is officially closing this Saturday, November 30.

But Santander is closing for new applications by the end of today, November 28, so you'll need to act fast or lose out forever.

Other major banks and building societies including Barclays, HSBC, Lloyds Banking Group, NatWest, Nationwide, Royal Bank of Scotland and Virgin Money close for new applications on Saturday.

If you're keen to open an account, double-check the exact cut-off time for each bank directly as it'll depend on whether you're doing it online, in branch or over the phone.

A Help to Buy Isa can be opened with just £1, and you won't have to pay any exit fees if you later change your mind.

Between December 2015 (when the scheme first launched) and the end of June this year, the government paid out 339,747 bonuses at the average value of £943.

In total, the Help to Buy scheme has supported 256,564 first-time buyers to get on the property ladder.

The scheme will be replaced by the Lifetime Isa, which can be opened by Brits aged between 18 and 39 to save towards a home or their retirement.

Here’s what you need to know about the Help to Buy scheme and how to apply.

What is a Help to Buy Isa?

An Isa is a tax-free savings account meaning that you can keep more of what you earn in interest on your cash.

A Help to Buy Isa is one that's backed by the government that will top up your savings to help you buy your first home.

The government will boost your savings by 25 per cent up to £3,000.

So for example, for every £200 you save the government will top it up by £50.

You can also earn interest on top of whatever you save.

The rates are set by the bank who you've taken an account with and vary depending on the lender.

If you decide to open an account, you'll need to claim your bonus by December 2030.

What are the best Help to Buy Isa rates?

HELP to Buy Isas are offered by many different high street banks and building societies - and they can be opened with just £1.

Rate: 2.58 per cent

Balance after 12 months, based on an initial £1,200 deposit: £1,231

Rate: 2.50 per cent

Balance after 12 months, based on an initial £1,200 deposit: £1,230

Rate: 2.50 per cent

Balance after 12 months, based on an initial £1,200 deposit: £1,230

Rate: 2.50 per cent

Balance after 12 months, based on an initial £1,200 deposit: £1,230

Rate: 2.50 per cent

Balance after 12 months, based on an initial £1,200 deposit: £1,230

Rate: 2.50 per cent

Balance after 12 months, based on an initial £1,200 deposit: £1,230

Who can get a Help to Buy Isa?

You must be aged 16 or over to open a Help to Buy Isa and you'll need to be a UK resident.

When opening an account, you'll need your national insurance number too.

You must be a first-time buyer and not own a property anywhere else in the world.

If you already pay into another cash Isa, you will need to move the money out of it when you open a Help to Buy account.

To get the bonus, the property you're buying must be in the UK, be the only home you own and where you intend to live.

You must also be buying the property with a mortgage.

You can also claim the bonus if you're using a Help to Buy equity loan or with Shared Ownership.

Why is the Help to Buy scheme being scrapped?

Ministers have decided to pull the scheme in favour of the Lifetime Isa (Lisa), which also gives buyers free government cash on savings worth up to 25 per cent.

The maximum free cash you can get over a lifetime is £32,000 but you can only use the money to buy your first home or to top up your pension when you're 60.

There are also fears that the Help to Buy scheme drove up house prices and only benefited the rich.

Official figures showed that the average earnings of someone who claimed the bonus earned £55,000 a year.

What help is out there for first-time buyers?

GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.

Help to Buy Isa - It's a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move.

Help to Buy equity loan - The Government will lend you up to 20 per cent of the home's value - or 40 per cent in London - after you've put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.

Lifetime Isa - This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.

Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you're restricted to specific ones.

"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.

Starter Home Initiative - A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.

Are there any downsides to a Help to Buy Isa?

You can open an account with a maximum of £1,200 but after that you're limited to saving £200 a month into it.

If you want to save more than that in one month then you'll need to consider opening another account to maximise your saving.

But you're only allowed to save into one Isa account in a year so you'll be taxed on the interest you earn in another type of account.

The minimum bonus is £400 meaning that you'll need to save at least £1,600 in your Help to Buy Isa before claiming the top-up.

Another downside is that you'll only qualify for the top-up on a property with a purchase price of up to £250,000, or £450,000 in London.

The money comes through when you complete on the purchase of the property - and you can only get it if you're buying it with a mortgage.

The cash actually never reaches your account but instead goes straight to your solicitors and is tied up in the purchase transaction.

It must be used towards your deposit or to cover the legal fees, such as solicitor's charges or stamp duty.

Lifetime Isa versus Help to Buy Isa - which is best?

The Lifetime Isa also gives a 25 per cent boost to your savings, but other terms differ, which makes choosing a winner complex.

You can save up to £4,000 in the first year with a Lisa, compared to £3,400 with a Help to Buy Isa.

This means that the maximum government bonus you'll receive after the first year is £1,000 in a Lisa, £150 more than a Help to Buy Isa.

Not many banks and building societies offer the Lisa though, so the interest rates on them aren't great - you'll earn more interest on a Help to Buy Isa.

For example, Barclays offers the top interest rate on a Help to Buy account at 2.58 per cent, compared to 1.40 per cent for Moneybox's market-leading Lifetime Isa.

What are the best Lifetime Isa rates?

IF you're looking to open an Lisa then these are the top-paying accounts:

Interest rate: 1.4 per cent

Open with: £1

Interest rate: 1.25 per cent

Open with: £10

Interest rate: 1.15 per cent

Open with: £1

Interest rate: 1.1 per cent

Open with: £1

Interest rate: 1 per cent

Open with: £1

Saving the maximum amount in a Lisa for 32 years would net you £32,000 of free government cash, which is more than you can get under the Help to Buy Isa.

You can also buy a pricier house, with homes of under £450,000 or more available to first-time buyers with a Lisa.

But unlike the Help to Buy Isa, you can only withdraw cash to either buy your first home or when you reach 60.

If you want early access you'll pay a 25 per cent penalty on the amount withdrawn, which means you'll lose £6.25 per each £100 you pay in.

And with a Lisa you have to wait a year after opening the account to get the bonus on your first home.

You can actually open a Lisa and Help to Buy Isa at the same time, although you can only use the government top-up from one to help you buy a house.

If you do decide to use the government top-up on your Lisa to buy a house you won't be able to get it again when you come to retire.

Millennial mum-of-one Ria Alice buys first home aged 24 and reveals tips that helped her to save a deposit whilst caring for her son

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