Martin Lewis is a wonderful resource to Britons, helping them take advantage of deals and money saving opportunities. He is urging Britons who are eligible to apply for the Help to Buy ISA. He explained all on the ITV programme This Morning today.
But if you want a Help to Buy ISA, you’ll need to go quick as the final deadline’s 30 November. However open it now, even with just £1, and you’ll keep access to the facility, which stays open for 10 years. So doing it is a good insurance in case you’ll need it in future (and parents may want to consider doing it for their 16-year-olds).
Can I get a Help to Buy ISA?
There’s no one size fits all, as each have strengths and weaknesses. The best thing to do is to read Martin’s full Help to Buy ISA guide, which takes you through it. Yet let me give you a brief explainer here…
H2B ISAs are available to more people. You just need to be aged 16+. To open a LISA you need to be age 18-39, so those 40+ should open a H2B ISA while they can.
LISAs can also be used for retirement savings (though they’re less attractive for this), but then you need wait until you’re 60 to access the money penalty-free.
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LISAs bonus can be £1,000s bigger. You can save far more in LISAs – up to £4,000 each tax year (as a lump sum or when you can) – and the bonus will be paid monthly until you’re 50. With H2B ISAs you can save max £1,200 in the first month and up to £200/month after, getting the bonus on up to £12,000.
This can make a big difference. For example open a H2B ISA today and max it out for two years and you’d have £5,800 in it, meaning a £1,450 bonus. With a LISA, if you put £4,000 in today and £4,000 in on both 6 April 2020 and 2021 (the new tax year), that’s £12,000 saved – a bonus of £3,000.
LISAs lets you buy a bigger property. Both can be used for a mortgage on any residential property, up to a set value. For H2B ISAs the limit’s £250,000 (£450,000 in London), for LISAs it’s £450,000 everywhere.
H2B ISA bonus can be triggered faster. To get the H2B ISA bonus you need £1,600+ saved, doable in just three months. Yet LISAs only pay the bonus if they’ve been opened a year or more (consider opening a LISA with £1 now, to start the clock).
LISAs bonuses can be used for exchange as well as mortgage deposit. The LISA bonus is added each month, and you can cash it in to give the seller the 10 per cent deposit most request at the point of contract exchange.
It’s worth noting if you’ve paid into a cash ISA in this tax year you can’t get a Help to Buy ISA (you can get a LISA), though there is a workaround. Just transfer your cash ISA to Nationwide, which has a system so you can get both, then open the Help to Buy ISA paying 2.5 per cent (you can transfer it elsewhere in the next tax year to earn more).
If you’re aged 18-39, will definitely buy a home costing under £450,000, can max out the savings and won’t buy within a year, go for a LISA, as you will get a bigger bonus.
If you’re older, need to buy quickly, aren’t saving that much, or aren’t 100 per cent sure you’ll buy at all, it’s safer to stick with a H2B ISA.
If you’re not sure, open both with £1 (if you can, put more in a Help to Buy ISA as you’re allowed to put £1,200 in the first month and you can withdraw it at any time). This gets a foot in the H2B ISA door before the 30 November deadline, and gets the clock ticking on the LISA’s ‘one year before withdrawal’ rule.