Free cash scheme for first-time buyers ending this year - should you sign up?

The government's Help to Buy Isa, a savings product that is specifically geared up to help first-time buyers save for a home, is set to close to new savers on 30 November 2019.

The Isa, which was launched in 2013, has paid out 225,618 bonuses which have helped first-time buyers purchase 169,980 properties. Couples buying a home together are able to save separately and each claim their own bonus.

The government claims that first-time buyers using Help to Buy Isas are able to buy a property three years sooner than those who do n0t use the scheme.

Which? explains how a Help to Buy Isa works, the key differences between a Help to Buy Isa and a lifetime Isa, and whether you should consider opening one before it's too late.

What is a Help to Buy Isa?

A Help to Buy Isa is a government savings product specially for first-time buyers.

All savings held within the Isa are tax-free, and the government pays an additional 25% on what you save, provided it's put towards the cost of your first home.

However, there are some caveats to bear in mind:

• You can only pay in up to £200 a month (with an extra £1,000 when you first open the account)
• You must have saved at least £1,600 to qualify for the minimum £400 bonus
• The maximum government bonus is £3,000 - which you'll qualify for if you save £12,000 or more
• The property you buy can be worth up to £250,000, or £450,000 if you're in London
• The government bonus isn't paid directly to you, but to your solicitor after the completion of the property purchase. This also means you can't put the bonus towards the exchange deposit.

If you've already opened a Help to Buy Isa, you have until 1 December 2030 to buy your first home and claim your bonus. If you haven't yet opened an account, you'll need to do so before the end of November, as the government will be withdrawing the product from the market at that point.

• Find out more:Help to Buy Isas explained

What are the best Help to Buy Isa rates?

As well as the government bonus, a Help to Buy Isa will also pay interest like any other savings account. The table below shows the nationally available accounts with the highest Help to Buy Isa rates.

_{Source: Which? Money Compare. Correct 7 January 2019.}

Some regional building societies offer even higher rates, but are only available to customers who live nearby.

Penrith Building Society, for instance, pays 3.00% AER on balances over £1 - but only those with a Cumbria postcode can open accounts with the bank.

We recently looked at which regional banks and building societies offer the best deals - you can read our news story,Are top savings rates hiding on your local high street?, for more details.

What savings alternatives are out there for first-time buyers?

If you miss the November deadline, or don't think a Help to Buy Isa is right for you, there are other products to help first-time buyers.

Lifetime Isas

The lifetime Isa is a similar government savings product, geared up to help both first-time buyers and those who want to save for retirement.

With this, you'll also receive a bonus of 25% on what you pay in.

As with the Help to Buy Isa, the lifetime Isa comes with restrictions. They include:

• Lifetime Isas can only be opened by those aged between 18-39.
• You must have had a lifetime Isa open for at least a year in order to qualify for the bonus.
• The maximum value of property you can buy is £450,000, anywhere in the UK.
• You can pay in up to £4,000 a year.
• The government bonus is paid monthly into your account, and can be put towards any of the costs associated with buying your first home.
• If you decide not to buy your first home with the money, you will have to wait until you turn 60 to access it - otherwise you'll have to pay a withdrawal penalty.

Find out more:lifetime Isas

Savings accounts for first-time buyers

Some banks and building societies have special products to help first-time buyers save for a deposit and the associated costs of buying your first home.

Monmouthshire Building Society First Home Bonus Saverpays 5% AER for the first five years if you deposit a minimum of £20. After five years, the AER reduces to 1%.

It's a high rate, but you won't benefit from the 25% government bonus, and should note that the account is only available to customers who live in the bank's catchment area.

The Hanley Economic Building Society Home Deposit Saver is available nationwide, and pays 3.10% AER when you make a minimum initial deposit of £100.

This account won't pay the government bonus either, and comes with other restrictions.

You'll lose 180 days' interest as a penalty if you spend the money on anything other than a housing deposit - and you'll also incur a penalty if you don't opt for a mortgage linked with Hanley.

• Find out more:how to save for a mortgage deposit