Help to Buy vs Lifetime ISA

Help to Buy ISA vs Lifetime ISA

If you’re saving up for your first house, you may be interested in the best ways to save. You may have opened a Help to Buy ISA before they were discontinued, or a Lifetime ISA* (LISA) which is still available to open, but what exactly are they? 

We’ll have a look at both and explore what it looks like to invest in a Help to Buy ISA vs Lifetime ISA.

Help to Buy ISA

The Help to Buy ISA is no longer available to new customers. You can still use it if you already have one, but if not then you may want to look at a Lifetime ISA* instead

A Help to Buy ISA is used towards a deposit on a home worth up to £250,000 (£450,000 in London). The maximum you can pay into your Help to Buy is £200 per month, which is £2,400 per year. A Help to Buy ISA allows you save a maximum balance of up £12,000. Once you save this money and put it towards a house, your solicitor will claim the 25% Government Bonus (up to £3,000). If you save over £12,000, the maximum Government Bonus is capped at £3,000.

This Government Bonus is added when the house deposit has already been paid. You can apply for the Government Bonus by asking your conveyancer or solicitor to apply for it once your offer to buy a house has been accepted.

Once you receive the Government Bonus, it will be given to you in addition to the money you pay towards your house. However, you cannot use the Government Bonus to pay for your initial deposit or for any solicitor’s fees. If you’d like the 25% Government Bonus, you must apply for this by December 2030. 

Lifetime ISA 

A Lifetime ISA allows you to save up to £4,000 per financial year (April-April) towards your first home. You will also receive a 25% Government Bonus on every contribution you make towards your first home and / or your retirement, plus interest from some providers. Here at Unity Mutual, we offer a 4% interest rate to help you save. 

Any UK resident between the ages of 18-39 can open a LISA and money can be paid into it until you reach 50 years old. However, you mustn’t have previously owned a property if you want to use any of the balance towards your first house. Furthermore, you must have had a LISA for 12 months before you use the money towards a house purchase. 

The money you save in your LISA can be used towards the deposit on your first home. Unlike the Help to Buy ISA, the bonus can be used towards your deposit, rather than receiving it once you’ve purchased your home.

The 25% Government Bonus is paid into your account shortly after each contribution you make and the interest is paid in annually, or added at the point a claim is made. 

However, if you take money from the LISA for something other than a house deposit, you will be charged 25% on the whole amount you withdraw – which puts you at risk of losing some of your initial investment.

If you have a LISA and Help to Buy ISA, you can only receive the Government Bonus on one of them. You cannot receive the 25% Government Bonus on both, or use both towards buying your first home. 

Help to Buy ISA VS Lifetime ISA

If you’re saving up towards your first home, you may be wondering which ISA is best for you. 

If you’d like to save up for a house over £250,000, you may debate switching to a LISA. If you already have a Help to Buy ISA and want to switch over to a LISA, you have the option of transferring up to £4,000 per tax year to your new LISA (minus any other contributions you’ve made into your LISA). 

You’ll still be entitled to the Government Bonus and Interest on the funds you transfer, and unlike the Help to Buy ISA, the bonus will be added the following month, so you should have an easier time tracking where you’re up to.

Here's a breakdown of some of the key differences between the Help to Buy ISA vs the Lifetime ISA:

Whether you choose to stay with a Help to Buy ISA or switch to a LISA, it’s completely your choice and depends on a number of lifestyle and financial factors.

As mentioned above, you can save up to £4,000 per year with a LISA. With the 25% Government Bonus on top of this, you could be saving up to £5,000 per year towards your house deposit. If you’re buying with someone else, you can use both LISA’s, potentially doubling your deposit. 

Where Can I Get a Lifetime ISA?

If you’re interested in opening an account with us, you can click here to open a Unity Mutual Lifetime ISA* or transfer your Help to Buy ISA to a Lifetime ISA. 

Unity Mutual cannot give you advice, we can only give you factual information, if you’d like to speak to a financial advisor visit www.unbiased.co.uk.

*Terms and Conditions apply