Help to Buy 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 before they were discontinued, or 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 vs Lifetime ISA.

Help to Buy

 

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 allows you save a maximum 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 LISA allows you to save up to £4,000 per financial year (April-April) towards your first home . You can also receive a 25% government bonus towards your first home or your retirement, plus interest from some providers. At Unity Mutual, we offer the market leading rate available to the general public of 1.5%**. 

(You can find out more about using a Lifetime ISA for retirement here)

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 the government bonus to purchase a house. Furthermore, you must have had a LISA for 12 months before you withdraw the money. 

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 the deposit, rather than receiving it once you’ve purchased your home. The 25% government bonus is paid in each month, and the interest is usually paid in annually. However, if you take money from the LISA for something other than a house deposit or mortgage, you will be charged 25% on the whole amount you’ve saved – 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. 

 

Help to Buy VS Lifetime ISA

 

If you’re saving up towards your first home, you may be wondering which ISA is best for you. Us millennials know that it’s important to make any savings we can these days, so it’s understandable you’ll want to know whether it’s worth switching over from a Help to Buy to a LISA.

 

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 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 Help to Buy vs Lifetime ISA:

Help to Buy ISA:	Lifetime ISA:
Save up to £3,000 a year	Save up to £4,000 a year until you turn 50
Government bonus capped at £3,000	Uncapped 25% government bonus of up to £1,000 per year
Savings capped at £12,000	Deposit on homes up to £450,000 in value, across the UK
Deposit on homes up to £250,000 in value (£450,000 in London)	Can be used to save for retirement even after you’ve bought your first home

 

Whether you choose to stay with a Help to Buy or switch to a LISA, it’s completely your choice and depends on a number of lifestyle and financial factors. We purely want to educate and inform so you can make the best decision for YOU. If you are unsure if this product is right for you, you may consider speaking to an Independent Financial Advisor.

 

As mentioned  above, you can save up to £4,000 with a LISA. With the 25% government bonus on top of this, you could be saving up to £10,000 within two years for your house deposit. If you’re buying with someone else, you can use separate LISA’s. This means you could receive up to £1,000 each per financial year in bonuses to help you reach your goal!

 

Additionally, we offer a 1.5% interest rate, which we’re proud to say is currently the best available to the general public across the UK**. 

 

 

Where Can I Get a Lifetime ISA?

 

If you’re interested in opening an account with us, and taking advantage of our market leading rate**, you can click here to open a Unity Mutual Lifetime ISA* or transfer Help to Buy to a Lifetime ISA. 

 

To compare which Lifetime ISA may be best for you, click here.

*Terms and Conditions Apply**Figures based on independently verified research conducted by Mustard Research – accurate as of April 2022
Unity Mutual cannot give you advice, we can only give you factual information, if you’d like to speak to a financial advisor click here.