Help to Buy ISA and Lifetime ISA are two bank accounts that you can use when saving up for your first home. Help to Buy ISA offers a brilliant 25% bonus on the amount you deposit (up to a maximum amount). The LISA (or Lifetime ISA) seems to offer the same 25% on top of your savings but for longer. So what is the difference and what should first time buyers choose?
A Closer Look at the LISA
The LISA (or Lifetime ISA) can be used for either retirement savings or for saving up to buy your first home. At first glance, the Help to Buy ISA is a bit more restrictive, in that you need to deposit money every single month. While when saving in the LISA you can deposit lump sums at any time throughout the year. However, as with most things in life, it is not that simple…
One thing to note about the Help to Buy ISA is that it has a maximum bonus of £3000, whereas the Lifetime ISA pays up to £32,000 (over the lifetime of the account). Another great benefit of a Lifetime ISA is that with some accounts you can invest as well as save, which allows more flexibility on what you do with the money in there.
In most situations, the lifetime ISA seems to offer a great deal more incentive. For instance, the upper limit for purchasing a property is much higher with the LISA. One point to consider is that if you are looking to purchase a property in the near future, then a Help to Buy ISA might be the better option. Mainly because with a LISA you cannot take the money out to purchase a property until you have had the account open for 12 months.
Help to Buy ISA Benefits
In the UK you can purchase a property from the age of 16 – so long as a legal guardian signs for you. And, the Help to Buy ISA can be opened by anyone over the age of 16, so is great for those looking to make an early start on the Property Ladder.
The LISA, on the other hand, has a higher minimum age limit of 18. Also, with the Help to Buy ISA you can take the money out at any time and not be penalized – however, you will not get your bonus. The LISA can only be taken out for retirement or purchasing a home otherwise you don’t get the bonus.
In the short term, a Help to Buy ISA is a good option. Provided you can keep up with regular monthly payments. Once you have exhausted this avenue, then moving on to a LISA seems like the best option. The fact that you can take money out of your Help to Buy ISA and not be penalized is certainly a positive thing. You will need to make sure that you have planned out the maximum amount that you can save because putting in lump sums is not an option.
The long and the short of it seems to be, in the short term a Help to Buy ISA is a good bet, however, if you are not looking to buy your first home inside the next 12 months then the Lifetime ISA could be for you.