The Help to Buy ISA offered an attractive 25 percent Government top up for those saving for their first home. The initiative was intended to help people buy their first homes, but unfortunately the deadline to apply has now passed. So if you’re looking to buy your first home, how does the Lifetime ISA (LISA) compare to the Help to Buy scheme?
What is Help to Buy?
Help to Buy began as a scheme back in 2013, with the aim of helping people onto the property ladder.
If you are part of the scheme, you can receive a government top-up of up to £3,000 towards your first home.
However, if you are planning on buying a house with another person – who has also saved in a Help to Buy ISA – you can combine your Government payouts to a maximum of £6,000.
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With Help to Buy, the maximum you can put into an ISA is £12,000.
Upon opening a Help to Buy ISA, you could deposit up to £1,200, but from then on you can only add in £200 per month.
The deadline to register for Help to Buy was November 30.
But if you have already opened an account you can continue saving, but must claim your bonus by December 1, 2030.
What is LISA?
The Lifetime ISA (LISA) was launched in 2017.
Like the Help to Buy ISA, a LISA is a savings account, and both have their similarities.
However, one big distinction between the two is a LISA allows you to put more into savings.
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Director at Unity Mutual Steve Code told Express.co.uk: “Like the Help to Buy ISA, the Lifetime ISA offers a 25 percent bonus to savers.
“You need to be aged 18 to open a lifetime ISA and you can’t open one over the age of 39.
“However, you can put up to £4,000 a year into a lifetime ISA, while a Help to Buy ISA only allowed you to save £200 a month after the first month.
“This means savers are able to get hold of more government cash overall if using the Lifetime ISA (up to £32,000).”
What are the benefits and drawbacks of a LISA savings account?
Personal finance expert and channel director at moneyguru.com, Deborah Vickers, spoke to Express.co.uk about the pros and cons of the LISA scheme.
She said: “A LISA is a good option to save towards a pension for self employed workers who don’t receive any contributions from a company pension scheme.
“A drawback is you have to open a LISA before you are 40, although you can continue to save and keep the bonuses until you are 50.
“Another drawback is the penalty if you wish to make an early withdrawal.
“If you take out any money before you reach 60 and do not use it to buy a first home, you pay a 25 percent penalty.
“A positive is the potential to earn a total of £32,000 in bonuses if you pay in the maximum £128,000 over 32 years from the age of 18.
“Once you have a LISA you are free to transfer it to another provider.”Source: Read Full Article