The Help to Buy ISA or Lifetime ISA? — your questions answered 🤯

Are you in a hurry? Find a quick summary at the bottom of the page ⏱.

You’re a first-time buyer and you don’t know whether you should you use the Help to Buy ISA (H2B), or Lifetime ISA (LISA). It’s a tricky question, right?

Sadly, there’s no definitive answer as it’ll depend on your personal situation. But we’re going to break it down and highlight what you need to know.

The only thing we will say is that in almost all circumstances you will benefit from the tax-free 25% bonus + interest — after all, it’s free!

To make the decision easier, we’ve got a few questions you should ask yourself :

(P.s. the H2B ISA is no longer available to new customers after the 30th November 2019)

Q1) Are you between the ages of 18–40? 👫

If so, then you can opt for either the H2B or LISA. However, if you’re 40 or above, then you can only opt for the H2B.

Note — the H2B is available to anyone 16+.

Q2) Are you sure you’re going to buy a home? 🤔

If not, consider the H2B. Reason being, if you decide not to buy a home you can withdraw the money (with any interest accrued), and only lose the 25% bonus.

Otherwise, if you opt for the LISA and decide not to buy a home, you’ll either have to leave the money until your 60+ or forgo the 25% bonus and pay a penalty for withdrawing.

Q3) Are you looking at buying inside or outside of London? 🏠

If you’re looking to buy inside of London, both ISAs will allow you to use the bonuses on a property up to a max. value of £450,000. However, if buying outside of London, only the H2B limits the max. property value to £250,000 — whereas the LISAs limit is still £450,000.

Q4) Are you looking to buy in the next 12 months? ⏳

If buying within 12 months, then you’ll want to opt for the H2B. The caveat being that to access the 25% bonus you must have saved at least £1,600. This can be done in min. 3 months (£1,200 lump sum in the first month, then £200 for the next two months).

However, if you’re thinking of buying in more than 12 months, then either ISAs can be considered as you’ll have access to the LISA’s bonus too.

Q5) Do you want to invest the savings?📈

If you do, then the only option is the LISA. Unlike the H2B where your savings can only go into a cash ISA account, the LISA gives you the option of putting your savings into a stock & shares ISA account too (capital at risk).

Other considerations

Those are the key decision questions you need to consider. However, there are some other points worth noting to make the final decision:

• The max. contribution for the H2B is £2,400/year (£3,400 in year one if you put in a £1,200 lump sum). Whereas, the max. contribution for a LISA is £4,000/year.
• The max. bonus from the H2B is £3,000 (that’s after 4 years and 8 months). Whereas, the LISA is £32,000 (assuming saving the max. between 18–49).
• The most common mistake — the H2B cannot actually be used for your home deposit (i.e. the sum you’ve saved up). Instead, it is used to deduct from the mortgage total amount (i.e. so you take a slightly smaller mortgage). Whereas, the LISA can be used to boost your home deposit too.

Disclaimer: This is only to be used as guidance, not advice.

Quick summary

• Pick the Lifetime ISA (LISA) — If you ’re sure you’re going to buy a home, for less than the LISA max. of £450,000, are aged 18 to 39, and you won’t do it within a year.
• Pick the Help to Buy (H2B) — If you’re older, need to buy quickly or you’re not 100% sure you’ll buy at all.

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And if you have any more questions about anything above, then please add in the comments below 👇.

That’s all for now folks.

The Homewards Team