Following on from the mortgage blog, I have had lots of questions asking about the difference between the 2 types of ISAs that you can use (and get a government bonus) when buying a property. So here is a quick explanation:
Lifetime ISA (LISA)
The Lifetime ISA (LISA) was launched in 2017 and although there aren’t many providers offering one, it might be worthwhile looking into as a way to save for a house. Here are the facts to know:
- You can pay in up to £4,000 per annum.
- The government will add a 25% bonus monthly (i.e. max £1,000pd).
- It can be a savings account or an investment account.
- It is to help people to buy their first home – as long as it costs £450,000 or less.
- And/Or to help save for retirement (after age 60).
- You can open one at 18.
- You can only open one if you are under 40.
- The bonus is paid every year until age 50.
- If you take the money out for another reason you are penalized by 25%.
- You aren’t penalized if you die or are terminally ill.
- You can do a LISA as well as a Cash ISA/Investment ISA.
- Couples can have one each.
Help To Buy ISA
Help To Buy ISAs were launched in 2015 to help people saving to buy their first property. The government will give your cash savings a 25% boost. So for every £200 you save (the maximum that you can save each month), you get a government bonus of £50. The maximum bonus you can get is £3000. Therefore if you save £12,000, you will get an extra £3,000. When you are buying your house, you will need to let your solicitor know that they need to claim the bonus on your behalf.
The Important Differences:
The Lifetime ISA was launched in 2017and has similarities with the Help To Buy ISA in that it adds a 25% bonus for first time buyers, but, it also allows you to save a lot more.
The differences are that the Lifetime ISA allows you to pay in lump sums and bonuses are paid in annually so you can start to get interest or investment gains (or loses) on the bonus too, rather than having to wait until you buy.
Lifetime ISAs also have the additional benefit that if you are not using the money to buy your first property, you can also use the money for your retirement and still keep the bonus.
I hope this has been helpful – please share with your friends and family.
Lots of Love
Miss Lolly xx
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