We all know that January is a long ass month where most of us will be eagerly counting down the days to pay day in a bid to financially recover from the festive period! It’s also a time when we tend to reflect upon the previous year and make goals and aspirations for the future; asking ourselves what do we really want?
For myself and many others in their 20’s, the idea of buying a house in the next few years is no doubt somewhere in our thoughts, whether it be at the forefront or lingering in the background. This is a bit of a daunting process, as we all know that it involves saving a shit load of money, meaning we need to restrict ourselves in other parts of our lives…like maybe not going on a gazillion holidays every year. I feel like I need to go into mourning for that realisation alone!
Anyway, if you know me well you’ll know that I’m far from a financial advisor and can’t even recite the timetables. So of course it makes perfect sense for me to write a blog post where I discuss the best ISA accounts for first time buyers! They just come with such great bonus’ that I couldn’t keep them to myself, and frankly if I understand them…anyone can.
A lot of you will have already heard of or have a Help to Buy ISA…but there will soon be a new girl on the block called LISA. Otherwise known as the Lifetime ISA, she’s the sassy cousin of the Help to Buy ISA! Helping first time buyers, they both promise to give you a 25% government bonus on top of your savings, although you can only claim the bonus from 1 of them. They have different specifications meaning that one account will be more beneficial for you than the other depending on your circumstances and plans.
I’ve listed some Q & A’s below. Hopefully it makes sense and helps you or a friend to realise which one you should get, or if you should transfer your Help to Buy into a LISA!
Who can open one?
Help to Buy:
Buyer aged 16 or over
Anyone aged 18-39
How much money can I put in?
Help to Buy:
- In the first month you can put in £1,200
- Every month that follows, you can only put in up to £200 a month.
- If you can’t afford to pay in a lot one month that’s fine, it’s just you can’t make up for it another month. The maximum is always £200 a month apart from that first month.
- In the first year you can save £3,400
- Every other year you can save £2,400
- You can put in £4000 a year into this account which is more than the help to buy ISA.
- You can also put your money into it in a more flexible way as there are no monthly limits, aslong as you don’t go over £4000 in a year you have free reign of when and how much you put in. You could put in one lump sum of £4000 if you wanted.
How much money do I get back?
If you are a first time buyer you get a 25% bonus with both accounts, but because you can put more money into LISA…you’ll get more back!
For example, if you open a LISA when it launches in April and put the maximum amount in that year (£4000), come April next year you’ll receive a £1000 bonus and have £5000 plus interest. Happy days!
Who is entitled to these bonus’?
First time buyers who use the money to buy a house. I will be buying a house with my boyfriend who owns our flat, and so because he isn’t a first time buyer he won’t be entitled to the bonus…but when we buy a property together I can use my bonus as its still my first property. However if the person you are buying with is a first time buyer too…both of you can have a separate ISA and both receive the bonus! So if each of you have a LISA and both put in £4000 this year, next year combined you’ll have £10,000 saved plus interest.
When do I receive the bonus?
Help to Buy: At the point that you buy a house, and so you won’t receive any interest on the bonus.
LISA: Annually, so you will receive interest on the bonus.
When can I use it to buy a home?
Help to Buy:
Once you have £1,600 in your account. Which if you put the maximum in, will only take you three months. At this point you would receive a £400 bonus. So even if you’ve saved your deposit and already know that you’re going to buy a house really soon, as long as it’s more than 3 months away, it’s still worth opening a Help to Buy ISA for a few months in order to bag yourself atleast £400 of free cash.
You need to have had a LISA for atleast a year before you buy a house in order to get the bonus. The LISA launches in April and I plan to transfer my Help to Buy into a LISA, because I know that we won’t buy a house before April 2018. If you are planning on buying a house before you’ve had a LISA for a year (?April 2018)…the Help to Buy is the one for you!
What’s the maximum property price?
Help to Buy:
£250,000, or £450,000 in London
Can I withdraw the money if I’m not buying a house?
Help to Buy:
Yes, you just won’t get the 25% bonus.
Yes, for retirement! This is why it’s called the lifetime ISA as it’s designed to give you a 25% bonus on 2 big things in your life – buying a house and then retiring when you’re 60. Although you don’t need to be a first time buyer to have a LISA. You could open a LISA and only use it for retirement if you wanted to. However if you withdraw the money and don’t use it to buy a house, and aren’t yet 60, there are likely to be hefty penalties, but it’s still being consulted on as far as I know. This is how LISA holds a higher risk in a way, as its tying your money up a little bit if you don’t use it for what it was intended when it was intended. Although sometimes I think that threat is good for people who tend to pick at their savings.
What if I already have a Help to Buy ISA but I now want a LISA?
You can transfer any money that was already in your HTB before April 2017, into a LISA within the first year of LISA’s life without it affecting your ISA allowance. This is what I plan to do! It means I can move the money from my HTB but I’ll still be able to put £4000 in this year. You can also keep both accounts open if you want and get good interest on the money that you have in your HTB. But you can only use the bonus from one to buy a house, which would be the LISA presumably, because you will no doubt have more money in it.
- If you are buying quickly (but more than 3 months away), the HTB is the one for you.
- If you aren’t buying before April 2018, LISA will probably be the best option for you as it allows you to save and receive more.
- If LISA is the one for you, open a HTB now and then transfer the money across when LISA launches in April, as in this circumstance it won’t affect your allowance for that year.
- With LISA, once you’ve bought a home and used the bonus, the account stays open. Although a pension will be the best option for retirement, it would be wise to put a wee bit away every month and still get the yearly 25% bonus for when you take it out aged 60.
- So even if you already own a house and you think you’ve just wasted 10 minutes of your life reading this pish…if you are wanting to save wisely for your retirement, aslong as you are 18-39 the LISA is still a great thing to have alongside your pension, as long as you don’t withdraw it until you are 60!
Thanks for reading! Even if you think you can’t save a lot and that buying a house or retiring is way off for you, open something up and start saving a little!