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Help to Buy ISA vs Lifetime ISA

There are many benefits to both the Help to Buy ISA and the Lifetime ISA, but how do you know which is best for you? Below we’ll explain everything about each scheme and what you should consider when making the decision.

Help to Buy ISA

The facts

  • For each £200 lump that’s deposited, the government will provide an additional £50 – an extra 25% of tax-free savings.
  • You can make a deposit of up to £1,000 upon opening an account. Whilst there’s no minimum monthly deposit, there is however a maximum which is £200.
  • It’s only available to first-time buyers who are over the age of 16.
  • The bonus is only for those who have saved a minimum of £1,600. The maximum bonus you can receive is £3000, for when you have saved £12,000.
  • Since you’ll accrue interest on your savings, be sure to compare the various accounts available at banks and building societies to find the best deal.
  • The cost of the property it’s used for cannot exceed £250,000 (unless the property is in London, where the limit is £450,000).
  • You can combine it with other savings, so it doesn’t have to be your sole deposit money.

Lifetime ISA (LISA)

The facts

  • This ISA first launched in April 2017 and lets you earn a 25% bonus for savings that are either spent on a deposit for a property or put towards a pension income for retirement.
  • The bonus is earned annually, which means you can earn interest on this as well as whatever else you save – unlike the Help to Buy ISA.
  • You can save much more than with the Help to Buy ISA. You’ll be able to save up to £4,000 a year with a max bonus of £32,000.
  • It can be used to buy any type of home, unlike Help to Buy, which is only available when buying new builds. It can also be used to buy any home that’s worth up to £450,000 or towards your pension income after you reach the age of 60.
  • It’s only open to those aged 18-39.
  • You’re able to pay in lump sums unlike the Help to Buy ISA, which only lets you contribute on a monthly basis.

Getting the bonus

  •  With the ISA any cash bonus you obtain will be paid directly to your conveyancing solicitor when you purchase the property.  The LISA bonus is paid every few months into the account but will be taken back if the money is not for a house purchase or for retirement.
  • With the LISA, if you don’t buy a home you can still get the bonus when you reach the age of 60, as it can also be used for retirement savings.
  • Inform your conveyancing solicitor that you’ll be buying with the ISA, ahead of time to avoid extra charges due to the further administration involved.

Just keep in mind…

  • You won’t get the bonus if you don’t end up buying a home with the Help to Buy ISA.
  • There’s no guarantee that future governments will honour these offers, which adds another risk to the bonuses.
  • If you don’t buy a home with your LISA but need to withdraw the money – before you turn 60 – you’ll end up needing to pay back the government bonus that was given to you.