Help to Buy ISA vs Lifetime ISA – which is right for me?

There are two government savings initiatives that aim to help people save for a first home; the Help to Buy ISA and the Lifetime ISA.

The Help to Buy ISA is closed to new applicants, but if you have one you can continue saving into it.

Both products come with a 25% government bonus, but there are several important differences between them.

©DevelopImages_OF_Brand2_-1611_Blue_BG (1)

How much can I save?

The Help to Buy ISA is closed to new applicants, but if you have one you can continue saving up to £200 per month into it until November 2029. You must claim the government bonus by 1st December 2030.

The maximum Lifetime ISA contribution in the current tax year (2019/20) is £4,000 (subject to contributions into other types of ISAs). This is the more generous allowance of the two schemes. You’ll receive a 25% bonus from the government on top of what you deposit, which means if you max out your allowance you’ll get an extra £1,000.

With a Lifetime ISA you can deposit £4,000 in a lump sum or make multiple payments across the year. The government bonus will be paid into your account on a monthly basis, meaning your savings will be boosted sooner than with a Help to Buy.

You can open a Lifetime ISA if you are aged between 18 and 39. And you can pay into the account until you reach the age of 50, meaning you could earn up to £32,000 in government bonus payments. For example if you already own a home, or choose not to use the funds towards a first home deposit, you can access your Lifetime ISA once you turn 60 to help fund the costs of retirement.

Savers can contribute a maximum of £12,000 in a Help to Buy ISA. This would generate a government bonus of up to £3,000. But this bonus will be paid when the house purchase is completed, meaning it cannot be used for a deposit.

With a Lifetime ISA your money can be used for both the mortgage and deposit.

How to transfer your Help to Buy ISA to a OneFamily Lifetime ISA

1

Apply online

Complete our Lifetime ISA online application form. During the application you'll be asked if you would like to transfer a Help to Buy ISA, select yes.

2

Submit your transfer form

Following completion of your Lifetime ISA application, download and fill out the transfer form and send this back to us.

3

Voila! We'll do the rest

Once your transfer form has been recieved we'll contact your Help to Buy ISA provider to complete the transfer and finalise your application by opening your Lifetime ISA.

Before transferring a Help to Buy ISA to a Lifetime ISA please ensure you have read all key documentation before submitting your application.

Apply for a Lifetime ISA

Who can open an account?

The Help to Buy ISA is now closed to new applicants.

The Lifetime ISA is only available to UK residents aged between 18 and 39, who can keep on paying into it until the age of 50. You must not have owned a property before if you wish to use the bonus to buy one.

Existing Help to Buy ISA customers can transfer their funds, up to £4,000, into a Lifetime ISA at any time, subject to existing contributions. Please note, you can only be able to use either the Lifetime ISA or Help to Buy ISA to purchase your first home, the government bonus won't be granted on both.

What else can it be used for?

The Help to Buy ISA 25% bonus is only applied for the purchase of your first home. The Lifetime ISA can be used to save towards your retirement or buying your first home, and can be used towards the house deposit, unlike a Help to Buy ISA.

While most people who are employed full-time are likely to benefit more from using a traditional pension, the self-employed and those who already max out their yearly pension allowances can use the Lifetime ISA as another way to save towards retirement.

If you decide to pay into a Lifetime ISA instead of a workplace pension you could miss out on valuable employer contributions. Money in a Lifetime ISA could affect your entitlement to means tested benefits. If you're not sure a Lifetime ISA is right for you, please contact an independent financial adviser.

What other restrictions are there?

Would-be first-time buyers should also make a note of the other restrictions on the scheme. As the schemes are meant to be used by typical first-time buyers, there are limits to how much your property can be worth.

The Help to Buy ISA limits property purchases to £250,000 or less, although this rises to £450,000 if the property is in London. The Lifetime ISA limit is set at £450,000, regardless of location.

If you choose to withdraw cash from the Help to Buy ISA you’ll face no penalty. However, with Lifetime ISA withdrawals, any money you withdraw before you're 60, that is not for the purchase of your first home, will be subject to a 25% government withdrawal charge on total amount withdrawn. This could mean you get back less than you paid in.

Alternatively, if you choose to buy a home outside of the scheme you can still keep the cash in the Lifetime ISA until you retire.

You can also use your Help to Buy ISA at any time, whereas the Lifetime ISA must be open for a year before it can be used, if you're planning on using it for the purchase of your first home.

Help to Buy vs Lifetime ISA Summary:

The Help to Buy ISA is now closed to new applicants, but if you already have one you can carry on saving into it until November 2029. Which account is better will depend on your personal circumstances.

If you prefer to invest in stocks and shares rather than save in cash, the Lifetime ISA could potentially be the right option for you as both cash and stocks and shares accounts are available. Stocks and shares can generate a higher return than cash savings, but remember the value of your investment can also fall due to market fluctuations.

For many people a consideration will be how much bonus you can earn. The Lifetime ISA gives account holders the opportunity to a bigger bonus each year, and for more years, than the Help to Buy ISA.

Interested in finding out more?

Click on the button below to find out more about our Lifetime ISA, including charges and eligibility.

Find out more