With help-to-buy ISAs being phased out on 30th November 2019, many people are considering transferring their funds into a Lifetime ISA. You’ll still be able to access existing help-to-buy accounts until 30th November 2029, but it’s worth knowing which option is right for you.
Help-to-buy ISAs have been around since before the Lifetime ISA was introduced – each have different conditions. With a help-to-buy ISA, you can use your savings and the government bonus to purchase a home that costs up to £250,000 outside of London, or £450,000 in London. With a Lifetime ISA, the property price limit is £450,000 whether the home is inside or outside of London. With a help-to-buy ISA, your government bonus is paid upon completion, whereas with a Lifetime ISA you can use that bonus towards your deposit when you exchange contracts. You may have previously set up a help-to-buy ISA but are now looking at properties outside of London that exceed that £250,000 limit – so what can you do?
You are free to transfer the savings in your help-to-buy ISA over to a Lifetime ISA, increasing your property price limit outside of London by £200,000; however, you must wait 12 months to access those savings and the associated bonus. The 12 month countdown begins from the date of the first payment, and that includes transferring money from a different type of ISA. If you were to transfer savings from one Lifetime ISA to another, however, the 12 month countdown would not be reset.
Converting to a Lifetime ISA can be a savvy move, but it may not be the right one for you. The help-to-buy ISA is still an option at the moment, and although the Lifetime ISA bonus is added regularly, rather than at the point of purchase, it comes with its own caveats. If the saver decides to use their funds for a different purpose (for long term savings for later in life, for example), there can be penalties.
Both options are helpful for encouraging first time buyers to build their savings, but your personal situation will be unique. If you have any questions around this topic, please feel free to get in touch with us directly.