If you are struggling to choose between the two house-buying ISAs to save for a deposit on a home, help is at hand from financial adviser Hargreaves Lansdown.
Whether you plump for a Help to Buy ISA, which was launched in December 2015 and supported over 100,000 property transactions, or opt for the newly launched Lifetime ISA, the ultimate decision could come down to the timing of your purchase.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said the Help to Buy ISAs has been a ‘no-brainer’ for anyone saving towards their property deposit in a savings account because it offers a 25% Government bonus on contributions.
Indeed, over one million people have taken out the product since the launch and £104 million has been paid out in bonuses.
However, if plans to step on the housing ladder are distant the Lifetime ISA, launched in April 2017 and also offering the 25% bonus, could be your best bet.
Sarah Coles said: “If you have at least a year until you plan to buy your first home, and you are aged between 18 and 39, the Lifetime ISA is usually better.”
Bonuses on Lifetime ISAs are paid monthly, money can be invested more flexibly and there is the option to put your money into stocks and shares as well as cash.
Cash is a great option for shorter-term gains but the stock market offers more potential for growth over five to 10 years.
The Help to Buy ISA doesn’t offer the same flexibility, the bonus is received on completion of the property purchase and there is only a cash option for investment. However, it does have other advantages over the Lifetime ISA.
It’s available to more buyers, not just first-time buyers aged 18 to 40. Also, it can be used to buy a property with three months of being opened, unlike the Lifetime option which requires a year of investing.
Plus, if savers decide they don’t want to use the money to buy a property, they can withdraw the investment early.
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