Help to Buy ISA vs Lifetime ISA

Help to Buy ISA vs Lifetime ISA

When looking to purchase your first home, it can sometimes be a confusing and daunting position to find yourself in.

But with the help of the government, there is hope for those who are struggling to save for a deposit or need a helping hand.

It’s not difficult to see why the government savings schemes have been popular and since the launch of the Help To Buy ISA in December 2015, over a million accounts have been opened by first time buyers with £1.8bn saved.

There are two main schemes available to help first time buyers the ‘Help To Buy ISA’ and a ‘Lifetime ISA’. But how do you know which is the best option for you?

Help to Buy ISA

If you are saving to buy your first home, put your money into a Help to Buy ISA and the Government will boost your savings by 25%.

So, for every £200 you save, you can receive a government bonus of £50. The maximum government bonus you can receive is £3,000.

  • Only available for first time buyers who are over 16 years of age.
  • You can make a deposit of up to £1,000 upon opening an account.
  • There is no minimum monthly deposit amount.
  • There is a maximum of £200 a month.
  • Available at a range of banks and building societies, and worth checking interests rates on the various accounts.
  • The cost of the property it is to be used for cannot exceed £250,000 (or £450,000 in London).

You can combine your savings when buying a home, this does not need to be your only source for a deposit.

Lifetime ISA (LISA)

The Lifetime ISA is designed for your first home or your retirement. If you’re not using the funds for your first home, you will need to be 60+ before you can access the funds. This can be set up as cash savings, so you gain interest or as stocks & shares investing.

The government will add 25% bonus to any savings added within a year, until you reach 50. The maximum amount of bonus is £33,000 (if you open an account at 18 and keep going until you hit 50)

  • This savings account is for an individual and cannot be opened by someone else.
  • Available for people aged between 18 and 39
  • Must be a UK resident or a member of the armed forces serving overseas.
  • Save up to £4,000 per tax year, tax free
  • If you do access the funds before you turn 60, there will be a 25% penalty charge.

In theory you can have both accounts, if you are eligible, however you will only receive the 25% bonus on one of the accounts.

Couples or partners who plan to purchase a house together can both open an account and both amounts can be counted towards a deposit, as long as they are both first time buyers.

If one partner has already owned a home, they will not be able to use the LISA funds without facing the withdrawal charge.

If you’re looking to purchase your first home and you would like to speak to a financial adviser, please get in touch with us and we can point you in the right direction. You are never alone when it comes to buying your first home and we here at Clarkes are here to make the journey as seamless as possible.

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