Help to Buy ISA: How the account differs from Lifetime ISA savings

Help to Buy ISAs witnessed a boom as Britons scrambled to save in this manner before the account closed last year. While the method has been popular, many are keen to understand the differences between this form of saving and the Lifetime ISA, which has also gained popularity. In addition, there is a strict deadline for saving on the Help to Buy ISA which may not work for people who are looking to continually invest over a longer period of time.

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On November 30, 2029, existing Help to Buy ISA savers will be stopped from saving into the account.

This has prompted many to consider their options for saving, and whether a Lifetime ISA could prove more suitable.

While both methods of saving are designed to help people purchase their first home, there are notable differences.

The first is the amount which can be saved in each account.

The Money Advice Service states savers can put aside £2,400 in a Help to Buy ISA per year, or £3,400 in year one of saving.

However, savers can put away slightly more in a Lifetime ISA – capped at £4,000 a year.

Although the Help to Buy ISA is more flexible, those who wish to save in a bigger way could well be enticed by the Lifetime ISA option.

A further key difference is the way in which the bonus is paid, and when savers can get their hands on this sum.

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While the bonus through the Help to Buy ISA is generous, it can only be claimed at a particular time which may seem far off for savers.

The bonus can only be claimed between exchange and completion, meaning it will contribute towards a mortgage deposit, and will not be able to be used at exchange.

However, the bonus from the Lifetime ISA is paid monthly, and can be used towards deposit requirements.

But although the Lifetime ISA appears like an attractive option, it also has withdrawal penalties which are particularly harsh.

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If savers draw out the money before the age of 60 for any other reason than buying a first home, they will have to pay 25 percent back.

This means many savers who need access to the money for other reasons could receive less than they originally put away.

For the Help to Buy ISA, once savings have reached the minimum amount, savers can claim their government bonus at any time, and can also close the account if they wish. 

Only one Help to Buy ISA is permitted to be opened by each individual. 

When purchasing a property, there are also particular requirements which a saver has to meet.

The home must have a purchase price of up to £250,000, or £450,000 in London, and it must also be the only home a person owns, and be where they intend to live.

It is worth noting that Britons can have both a Help to Buy ISA and a Lifetime ISA at the same time.

However, they should be aware they can only claim one bonus towards the purchase of their first home. 

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