Money Saving Expert’s Martin Lewis has warned people who don’t own a home to open a Help to Buy ISA with just £1 before the initiative ends in November.
Thanks to the housing crisis and no access to a Bank of Mum and Dad, the government’s Help to Buy scheme seems the likeliest way for many people to become first-time homeowners. A Help to Buy ISA basically means that the government will add 25% to your savings, up to a maximum of £3,000 on savings of £12,000, to help you buy your first home.
But the deadline for opening a Help to Buy ISA is 30 November, which really isn’t that far away. And although the scheme isn’t without its flaws, financial expert Martin Lewis recently advised people to take advantage of it by opening an account with just £1 before deadline.
Writing in his popular newsletter a couple of months ago, Money Saving Expert founder Lewis advised people who are not yet on the property ladder to open a Help to Buy ISA.
He said: “If you think you’ll need these [a Government top-up account] but aren’t sure, just open them. You need £1 in a Help To Buy ISA by November 30 or you lose the opportunity.”
He also appeared on Good Morning Britain on Friday (6 September), saying: “The easiest, simplest form of help for first-time buyers to build a deposit closes to new applicants on 30 November – now less than three months away.
“First-time buyers saving in Help to Buy ISAs get a 25% boost from the state, so each £1,000 saved becomes £1,250.
“So if you may one day want to buy a home, consider opening one now with £1 or more, as then the facility stays available until 2029.
“The Help to Buy ISA’s replacement, the Lifetime ISA (LISA) also gives a 25% boost – but other terms differ, so choosing a winner is complex…”
So, what do we know about the LISA that the government is favouring instead? There are pros and cons for each type, so the right one for you depends on your circumstances.
Here are a few differences:
– You need to be over 16 to open an ISA, but LISAs can only be opened if you’re between 18 and 39 (so definitely open an ISA now if your 40th birthday is approaching).
– The Help to Buy bonus is triggered after three months of max savings, but you must have had a LISA open for a year.
– The LISA bonus is much bigger than the ISA bonus.
– The LISA lets you buy a property worth up to £450,000 anywhere in the country, while the ISA lets you buy a home worth up to £250,000 (up to£450,000 in London).
You can find a detailed review on the differences on Money Advice Service.
Lewis’ advice means that at least you have the option to continue an ISA or choose the LISA, so it’s definitely worth considering.
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