How to double your Lifetime Isa bonus with Help to Buy

Help to Buy Isa savers can bag a bigger annual bonus from the government by shifting their cash to a Lifetime Isa before next April.

Saving up a significant deposit is among the biggest challenges facing first-time buyers, with slow wage growth and rising property prices locking many out of home ownership.

Savings accounts such as the Help to Buy Isa and lifetime Isa (LISA) give savers a boost in the form of a 25% bonus when they come to buy a house - and until next April, switchers can benefit from a bigger bonus, potentially even doubling the government's contribution.

Extra boost for those who transfer

Savers are able to deposit up to £4,000 a year into a Lifetime Isa, and the government will pay a monthly bonus of 25% on any contributions made.

Currently, you can transfer yourHelp to Buy Isa balancefrom last tax year (ending 5 April 2017) across to a LISA without the funds counting towards your yearly contribution limit.This meansfirst-time buyerscould get a bigger bonus from the government towards buying a home or retiring.

But time is running out - the exception is only available until5 April 2018.

Example

Let's assume you've had a Help to Buy Isa since its launch in December 2015. If you've maxed out your deposit limits by April 2017, you'll have a total balance of £4,000.

You can transfer this into the LISA, on top of your normal yearly LISA allowance of £4,000 - meaning your maximum bonus could be £2,000 for the year, instead of £1,000.

To learn about the basics of these two savings schemes, check out our full guides on the Help to Buy Isa and lifetime Isa.

Help to Buy Isa v lifetime Isa

While both the Help to Buy Isa and LISA offer a 25% bonus on your savings when you come to buy a house, the LISA has some better long-term advantages.

• LISAs offer a bigger bonusYou can only pay £200 a month into a Help to Buy Isa (after an initial £1,200 deposit) and only get a maximum bonus of £3,000. LISAs allow you to save up to £4,000 a year until the age of 50 - and you get a 25% bonus on your contributions. This means if you open one at 18 and contribute the maximum until the age of 50, you could get a bonus of up to £33,000.
• You can save whenever you wishWhile Help to Buy Isas have a £200 monthly savings limit, you can save your maximum of £4,000 a year into a LISA at any point.
• Bonuses are paid more quicklyHelp to Buy Isa bonuses are paid through your solicitor on completion, but LISA bonuses can be used for any deposit required on the exchange of contracts.
• LISAs are available on more expensive homesHelp to Buy Isa bonuses can only be used on homes worth up to £250,000 (or £450,000) in London, while the LISA can be used on properties priced up to £450,000.
• But you pay a penalty for withdrawing from LISAWith a Help to Buy Isa account, you can withdraw your cash at any time, though you won't receive the bonus if the funds don't go towards purchasing your first home. But with a LISA, you'll pay a 25% penalty to withdraw cash or assets, unless you're buying your first home, aged over 60, or terminally ill.

Is there any point in having a Help to Buy Isa now?

Ultimately, it's likely that LISAs will eventually take over from Help to Buy Isas - which will only be available until November 2019.

There is one circumstance where transferring your Help to Buy Isa balance to a LISA would be a mistake, however.

If you're planning buying a home in the next year, you're better off keeping the cash in a Help to Buy Isa - as you can't withdraw funds and redeem your bonus until you've had a LISA for a year.