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help to buy isa vs lifetime isa

Help to Buy ISA vs Lifetime ISA: Which One is the Best?

Saving for the future plays an important role in securing your and your family’s interest. In case, you’re searching for the right savings scheme with the maximum benefit, then Help to Buy ISA and Lifetime ISA are two notable options. However, Help to Buy ISA is no longer available after 30 November 2019. Well, the people who had already availed Help to Buy ISA, can still enjoy the benefits of the scheme. But, you need to abide by definite regulations.

On the other hand, Lifetime ISA is still available for all. Both policies are government initiatives. If anyone wants to save for his or her first home, then both ISAs are great options. Both products offer a 25% government bonus. But, there are numerous prime differences between them. 

Let’s check whether Help to Buy ISA vs Lifetime ISA can offer you the most of the benefits when it comes to savings.

Help to Buy ISA vs Lifetime ISA: Contrasts between them

Unfortunately, the Help to Buy ISA is currently not available for the new applicants any more. However, the policy hasn’t discarded the existing benefits from the scheme. In case you have already had one Help to Buy ISA, then you are liable to save up to £200 every month. In addition to this, you can deposit into the savings scheme till November 2029. And, the benefiter must claim the government bonus within December 1, 2030.

Whereas, Lifetime ISA is designed for bigger benefits and it can address your first home or retirement plan. Additionally, it offers a bonus of 25% on tax-free savings. In case the policyholder can pay the maximum amount every month, then it would assure a £32000 bonus from the government. 

Let’s check the highlights of Help to Buy ISA vs Lifetime ISA schemes.

Help to Buy ISA

A Help to Buy ISA is a government scheme that lets you save a certain amount for a mortgage deposit. Thus, you can purchase your home. In order to qualify for the benefits, you have to be a first-time buyer. In addition to this, you can’t have any other property. These are the quick things to remember regarding a Help to Buy ISA when you are confused between Help to Buy ISA vs Lifetime ISA:

  • The government scheme would offer you a 25% rate to your savings, it can result in a bonus of up to £3000.
  • People who are more than 16-year-old and want to save for their first home can qualify for the scheme.
  • When you are going to buy the home, you can claim the bonus after the funds are available on the completion of the ISA.
  • If you are a resident of London, then you can buy a property worth up to £450000, or else you can purchase a home worth up to £250000.
  • If anyone wants to quit on the Help to Buy ISA, then he or she doesn’t have to pay any government charge. Instead, the withdrawal would receive a bonus on the savings.

Lifetime ISA

Launched on 6 April 2017, Lifetime ISA is a popular option for those who want to save up for their first home or retirement span. Like the Help to Buy ISA, Lifetime ISA does possess a set of rule and regulations and here they are:

  • People who are between the age between 18 and 40 can apply for the Lifetime ISA. And, they can save for their first home or retirement plans.
  • The interest rates are quite high. The government pays out a bonus of 25% of your savings. And, it can touch up to £4000 each year, depending on your sayings.
  • With Lifetime ISA, the bonus is available on a monthly basis. On the other hand, you can avail funds on the exchange.
  • You can render the opportunity to grab a property worth up to £450000 anywhere in the United Kingdom. So, you can switch to a bigger property with Lifetime ISA.
  • However, you have to face a hefty charge, if you want to withdraw the ISA earlier than the maturity date. The government imposes a 25% withdrawal charge on the amount you are paying if you go for early withdrawal.

Moreover, the government has decided to decrease the withdrawal charge from 25% to 20%. Well, this is applicable for the time period from 6 March 2020 to 5 April 2021. The intention behind such a decision is to relieve the stresses on people who are badly affected by the pandemic. The pandemic situation might force people to utilize their savings beforehand. That’s why the government has relaxed the withdrawal penalty charges up to some extent.

Help to Buy ISA vs Lifetime ISA: Which one to Continue?

In case you have initiated investing in both Help to Buy ISA and Lifetime ISA, then you can carry on with the investments. You can continue saving in both accounts. However, bear in mind that you can draw only a single fund or claim to buy your new property or first home. You have already learnt the benefits and downsides of Help to Buy ISA vs Lifetime ISA. 

Both the ISAs are available with 25% of the savings. However, the major difference between these savings schemes is that Lifetime ISA can deliver you a bonus of £4000 every year. Whereas, the Help to Buy ISA is designed to offer you a bonus of up to £2400 every year. Apart from the bigger savings and benefits, still, the Help to Buy ISA is way more flexible than the Lifetime one.

In addition to this, the bonus regarding Lifetime ISA can be paid every month at any exchange of contracts. And, this facility is available in England, Northern Ireland and Wales. Where you have to claim the bonus associated with Help to Buy ISA between the time frame of exchange and completion. You can’t use the bonus at the exchange. If you reside in Scotland, then you need to hire a solicitor to apply for the Help to Buy ISA, after you make your mind to buy the first home.

The prime disadvantage of Lifetime ISA is that you can’t claim for an early withdrawal until it becomes a year since you have applied for the ISA. Additionally, if you draw out the claim before you turn 60, then there’s a definite penalty charge awaiting you. So, keep these factors in mind while deciding whether to stick with Help to Buy ISA or Lifetime ISA.

Help to Buy ISA vs Lifetime ISA: Who can Apply?

Nobody can now apply for Help to Buy ISA. But, if you’re a citizen of the United Kingdom and aged between 18 and 39, then you can open a Lifetime ISA account. And, you can pay into the Lifetime ISA scheme till you reach the age of 50. Moreover, the applicant shouldn’t possess any other property. And, you can’t own property as well before getting the bonus.

Transferring Help to Buy ISA Funds to Lifetime ISA

Yes, it’s possible to transfer the funds regarding Help to Buy ISA to a Lifetime ISA account if anyone wishes to. If you’re an existing Help to Buy ISA customer then you are liable to transfer an amount of up to £4000 to the Lifetime ISA account. On an important note, you can only use a single claim or fund when you wish to use up the money for buying the first home in your life. So, make the right decision: Help to Buy ISA vs Lifetime ISA.

However, if you want to reverse the process, for example, transferring Lifetime ISA to other forms of ISA, then you would face penalty charges. But, there is no such penalty or charge on Help to Buy ISA, if you wish to transfer it to other ISAs.

Additional Facts

If you want to go with Lifetime ISA, then there are different perks for both who want to gain the first home or retirement advantages. In case, you want to buy your first home, then here are a few things that you shouldn’t miss:

  • The customer can’t own a single property.
  • You can purchase a property in the UK only and that property should not exceed £450000
  • Individual among couples can have their own Lifetime ISA
  • Lifetime ISA is less flexible, but with greater benefits

On the other hand, if you are a retirement saver, then here are some things you have to bear in your mind:

  • You are liable to claim the bonus at the age of 60.
  • You have to rely upon share-type investments as long as you want to keep Lifetime ISA

Final Verdict: Help to Buy ISA vs Lifetime ISA

Help to Buy ISA is no longer available. In case, you have one you can deposit your savings into it, and carry it on until November 2029. And, you can go with Lifetime ISA easily. Moreover, if you like to invest in stocks and shares, then Lifetime ISA is an ideal option for you. Make sure that you are aware of the stock market fluctuations and the risk associated with such share-type investments. Therefore, it’s your choice depending upon your personal circumstances: Help to Buy ISA vs Lifetime ISA.

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