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Just six months left to open a Help to Buy Isa - but should you bother?

Could you be better off going for a lifetime Isa?

As of today, aspiring home buyers have just six months to open a Help to Buy Isa before the scheme closes on 30 November. After this, the only way for first-time buyers to earn a government bonus will be the lifetime Isa.

So, should you get in now, while you have the chance? And what happens if you already have a Help to Buy Isa?

Which? explains everything first-time buyers need to know ahead of the changes.

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Does the Help to Buy Isa help people buy homes?

Help to Buy Isas offer people saving up for their first home a 25% bonus from the government, up to £3,000.

In total, 218,371 properties have been bought with the support of Help to Buy Isa accounts, the latest HMRC data shows.

The government has paid out 286,604 bonuses, at an average value of £899. To earn this bonus, savers would have put away £3,596 over a minimum of 13 months.

Help to Buy Isas have also helped buyers onto the property ladder at younger ages. The average age for Help to Buy Isa buyers is 27, significantly lower than national first-time buyer average age of 30.

As for the kind of properties being bought, they tend to be cheaper than average first homes. Those with Help to Buy Isas have bought properties with an average price of £173,627, while the average first-time buyer house price is £194,237.

Find out more:Help to buy Isas explained

Help to buy Isa or lifetime Isa?

After 30 November, you won't be able to open a Help to Buy Isa any more. An alternative would be a Lifetime Isa. But while both accounts offer a 25% boost from the government on your savings, there are significant differences you should be aware of.

Help to Buy Isas offer up to a maximum of £3,000 in bonuses, which would require £12,000 in savings over four-and-a-half years. By contrast, the maximum Lifetime Isa bonus is £32,000, though you'd need to save £128,000 over 32 years to earn this.

Moreover, with a Help to Buy Isa, the bonus is paid to your conveyancer after the property sale has completed, so it can't go towards your exchange deposit. The Lifetime Isa bonus, by contrast, can go towards your deposit, but you'll need to complete the sale within 90 days.

With a Help to Buy Isa, if you decide you want your savings back, you can withdraw them at any time - but you won't receive any bonus, and the interest may become taxable if it's not in an Isa wrapper.

A drawback of the Lifetime Isa, meanwhile, is the harsh penalty to withdraw money for any reason other than buying your first home or being over the age of 60. Not only will you lose the government bonus on what you withdraw, but there's also a 6.25% charge on your own cash.

The table below sums up the main similarities and differences between the two savings products.

Help to Buy IsaLifetime Isa
What kind of Isa is it?Cash IsaCash Isa and stocks and shares Isas
Who can open this account?Anyone aged 16 or over who has never owned a propertyAnyone aged 18-39. Can't have owned a property before if you want to buy a home
How much can I pay in each year?Up to £3,400 in year one, then £2,400 a yearUp to £4,000 a year
Can I deposit a lump sum?No. You're capped at depositing £200 a month, except in the first month when you can pay in up to £1,200Yes, but no more than £4,000 a year
What is the maximum bonus I could receive?£3,000, if you save the maximum of £12,000£32,000, if you save the maximum amount of £128,000 between ages 18 and 50
When is the bonus paid?Upon completion of buying a propertyMonthly
What's the maximum property price?£250,000 in most areas of the UK; £450,000 in London£450,000 anywhere in the UK

'I'm using a lifetime Isa to buy a house - but I'm still keeping my Help to Buy Isa'

Of course, you don't actually have to choose between the two savings accounts if you don't want to.

Helena, a 32-year-old manager from London, transferred £4,000 from her Virgin Money Help to Buy Isa to fund a new cash lifetime Isa with Newcastle Building Society in April this year - but she's not planning on closing her existing Help to Buy account.

'I originally got the Help to Buy Isa about three years ago, and just put the maximum deposit in each month. It's got quite a good interest rate - I'm on around 3% - which is better than any other bank account I could get.

'When I found out about lifetime Isas, I took out £4,000 from my Help to Buy Isa and transferred it over just before the end of the tax year in April, so I'd get an extra £1,000 bonus straightaway.

'I'll be using the savings in my lifetime Isa to eventually buy a house - an extra £1,000 just feels like a no-brainer - but I don't really want to lock all of my savings into a lifetime Isa unless I'm sure, so I'd like to keep some cash accessible in case of an emergency, while benefiting from the high interest rate.'

Find out more: lifetime Isas

I already have a Help to Buy Isa. What should I do?

If you already hold a Help to Buy Isa account, you don't need to do anything. The 30 November deadline is just for those wishing to open a new account, and there'll be no change for existing savers.

While there is a time limit on claiming your bonus, it's not until 1 December 2030 - so there's plenty of time to save up.

If you decide to close your account, one way to make sure you'll still earn the 25% government bonus on your savings is to transfer your cash into a lifetime Isa.

You can only pay up to £4,000 into a lifetime Isa in each tax year, so you might have to spread out the transfer into several tax years if you've already saved a lot.

Alternatives to Lifetime Isas and Help to Buy Isas

If you feel that neither Help to Buy Isas or lifetime Isas are right for you, some building societies provide accounts specifically for first-time buyers.

Monmouthshire Building Society's first home bonus saver account pays 5% AER for five years (after which time the rate drops to 1%), and you need just £20 as a minimum initial deposit.

Elsewhere, Hanley Economic Building Society has a home deposit saver that pays 3.1% AER, and requires a minimum initial deposit of £100.

These providers have their own restrictions, so check the terms and conditions before you sign up.

Find out more:how to save for a mortgage deposit