For many people, high property prices mean the dream of homeownership remains a distant prospect, but there is some help at hand for those trying to get on to the ladder.
Both the Help to Buy Isa and Lifetime Isa offer financial support to those saving to buy a property, and which account you should pick depends on your circumstances.
Savers using a Help to Buy Isa – which launched in December 2015 – can deposit £1,000 when they open an account plus £200 each month.
You’ll earn a 25% bonus on your balance, up to a limit of £3,000. You can use this to buy a property worth up to £250,000, or £450,000 in London, and the government bonus is paid when the property sale completes. Note, there is only a cash version of the product.
The top Help to Buy Isa, available nationwide, comes from Barclays, paying 2.53%. You can apply for this account in branch or over the phone.
Elsewhere, the Virgin Money Help to Buy Isa (Issue 4), which must be opened online, and the Buckinghamshire Building Society Help to Buy Isa (Issue 2), which can be opened by post or in branch, both pay a competitive 2.25%.
While Barclays offers the best nationally available account, some smaller building societies offer higher rates of interest to customers who live in the local area: Penrith Building Society pays 3%, Cumberland Building Society pays 2.6%, Newcastle Building Society pays 2.56% and Darlington Building Society pays 2.55%.
The Lifetime Isa joined the Isa family in April 2017, and aims to help both those saving for a house worth less than £450,000 and those saving for retirement. If you are aged between 18 to 39, you can save £4,000 a year in the Lifetime Isa, which can be a lump sum or spread through the year. The government immediately adds a 25% bonus when you save or invest, up to a limit of £33,000.
At present, only one provider offers a cash version of the account – the Skipton Building Society Online Cash Lifetime Isa pays 0.75% to savers.
AJ Bell, Foresters Friendly, Hargreaves Lansdown, Nutmeg and The Share Centre are the major providers offering the stocks and shares equivalent if you would prefer to invest.
How to move your money
You can transfer your Help to Buy Isa into a Lifetime Isa and receive the 25% government bonus, but you must do this before 5 April 2018. Any Help to Buy savings made before 5 April 2017 will not eat into your £4,000 allowance for the 2017/18 tax year either.
You can save more in a Lifetime Isa, so it’s a better bet for most people. However, a Help to Buy Isa is the best option if you plan to buy soon, as the Lifetime Isa must be open for a year before you can use it to buy a home.
Also, if you change your mind and decide not to buy a home, the Help to Buy Isa has no penalties for withdrawing your cash. Withdrawals from the Lifetime Isa incur a 6.25% penalty, although you can withdraw cash for your retirement once you reach the age of 60.
The Help to Buy Isa is considered a version of the Cash Isa, which means in most cases you can’t pay into both types of account in the same tax year. A few providers – such as Aldermore and Nationwide – offer a split Isa, which means you can max out your full £20,000 yearly Isa allowance between the different Isa products.
Featured product: Nationwide Help to Buy Isa
If you’re able to save more than the £200 monthly Help to Buy Isa allowance, the Nationwide Help to Buy Isa is worth considering.
While this only pays 2%, it is one of a few providers that lets you keep the rest of your yearly allowance inside a separate Cash Isa – this is known as a split Isa. It can be opened online and in branch. Its top easy-access Cash Isa pays 0.75%
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Source Moneywise http://ift.tt/2EmZaG1
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