Published On: Mon, Nov 18th, 2019

Help to Buy ISA vs Lifetime ISAs: How your savings may see your mortgage rates be reduced | Personal Finance | Finance

For many people, the key to becoming the owner of a property will be by saving for a deposit and getting a mortgage. While there are a whole host of ways to save, some may opt to open a Help to Buy ISA and/or a Lifetime ISA. That said, the deadline for opening a Help to Buy ISA is looming, with the cut-off date being November 30, 2019.

Ahead of the deadline, spoke to Jennifer Lloyd, who is a savings expert at Skipton Building Society.

Ms Lloyd said: “The Help to Buy and Lifetime ISA are useful assets to have in the homebuying process, but it’s worth being aware of some important differences between them.

“The key difference is that the bonus is released after completion with a Help To Buy ISA, which means it cannot be used for the house deposit.

“However with the Lifetime ISA, the bonus is paid monthly and can crucially be used towards the house deposit.

READ MORE: Help To Buy ISAs: First time buyers should open ISA NOW before scheme ends, expert warns

“In addition, the Lifetime ISA bonus benefits from earning interest for the duration too, which the Help To Buy bonus does not. In both cases, the bonus is 25 percent.

“It is possible to have both a Help to Buy and Lifetime ISA, but you can only use the bonus from one of the products when buying a house.

“It’s worth noting that the Help To Buy ISA needs a regular monthly contribution, and if you do not contribute within the month, then you ‘lose’ the allowance. The Lifetime ISA is more flexible.

“When it comes to withdrawing from your Lifetime ISA, it’s really important to remember that to make a charge-free withdrawal you must be using the funds to buy your first home (or for your retirement once aged 60), and the account must have been open for at least 12 months – otherwise you will incur a withdrawal charge of 25 percent of any amount you withdraw.”

Saving for a deposit can seem like a challenge, however some people may amass more cash than they thought they would need for the required deposit.

If this is the case, it may be that they’re able to access a lower mortgage rate, as Ms Lloyd explained.

She said: “If you have enough money to put down a 10 percent deposit, you will find that the rate of your mortgage will be lower than if you only put down five percent.

“If there is money left over in your Lifetime ISA this can go towards retirement.”


Mr Lewis said: “The Help to Buy ISA is closing soon.

“It’s the simplest, easiest form of help for first time buyers. You save money in there and then the state adds a 25 percent boost.

“So for every £1,000 you put in, you get 25 percent – £250 on top. It’s an absolute no brainer – however, it closes to new applicants on November 30.

“There is now less than a month and then it’s gone,” he warned.

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