Buying a house is a far-off dream for a lot young people in the UK. However, there's one scheme available that may make it more realistic. Money Saving Expert founder Martin Lewis is advising all prospective first-time buyers to apply for a Help to Buy ISA before the scheme's Nov. 30 2019 deadline. The reason he's advising this is because you don't need a huge amount of money to do so. In fact, just £1 will do.
The Help to Buy ISA (also known as H2B) aims to help first-time buyers afford a house deposit. The government scheme offers a 25% bonus on savings; meaning that every £1,000 that you save will automatically become £1,250.
Naturally, there are a few clauses to pay attention to. Namely, that you can only save a maximum of £1,200 in the first month followed by a maximum of £200 in subsequent months. The bonus is also only eligible for properties up to £250,000 (or up to £450,000 if located in London) and has a maximum value of £3,000.
Anyone can apply, as long as they are at least 16 years of age and have never owned a property before. If you're looking to buy with a partner or friend who isn't a first time buyer, you can still open a H2B ISA. But they won't be able to.
As well as receiving a government bonus, you'll also earn interest on your savings. Consumers' Association Which? has put together a handy table to help you find the best interest rates. You can withdraw the money at any time, but will lose out on the bonus if you use the cash for anything other than buying a property.
Although the deadline for applications is Nov. 30 2019, you have until Dec. 1, 2030 to claim your bonus, notes the Money Advice Service. By that time, you could have earned a few extra thousand pounds to put toward a deposit or mortgage.
There is an alternative to the H2B ISA. Known as the LISA (or Lifetime ISA), it provides the same 25% bonus. LISA rewards are potentially much greater as they allow you to save more than H2B ISAs. Up to £4,000 per tax year, to be precise. The bonus maximum is £1,000 per year.
However, it's a slightly stricter scheme. You have to be between the ages of 18 and 39 to apply and have to wait a year to be able to cash out. If you don't use the money for a property, you will lose 25% of the savings. (This rule doesn't apply if you wait until you're over 60 or if you have been diagnosed with a terminal illness.)
If you're not sure whether you're going to ever be a homeowner, Lewis advises dropping £1 into a H2B ISA. However, if you defintiely know you will be buying a property at some point, a LISA may be a better option.
Whatever you do, just don't forget to make a decision before Nov. 30.