Martin Lewis, Money Saving Expert, 45, appeared on ITV show This Morning to talk about ISAs, or Individual Saving Accounts.
He outlined the different types of ISAs it is possible to get, and explained which is suitable depending on who you are.
Martin said: “There is £1,000s of free cash available for first time buyers saving for a property.
“You do it via two special ISAs which give you just that; but you’ve only a few days left to decide which one is right for you.
“For those saving for a first-time residential property, Help to Buy ISAs (launched in 2015) and Lifetime ISAs (launched last April) are no-brainers.
“You save in them, and as well as interest, an unbeatable 25 per cent bonus is added on top. In other words you get an extra £250 per £1,000 saved towards any mortgage.
“But as you can only get the home-buying bonus on one of them (even though you can have both, as LISAs can instead be used for later life saying), you need to pick which is right for you.
For full details on how they work (e.g. can you get one if your partner isn’t a first time buyer) and best-buys see Martin’s Help to Buy ISA guide and Lifetime ISA guide.
But how do you decide which ISA is the better one for you to save?
According to Martin, “If everything else was equal, LISAs would be an easy winner, as you can save far more in it – up to £4,000 each tax year in a LISA, compared to just £200/mth (£1,200 in the first month) in a Help to Buy ISA – that means you get a far bigger bonus.”
“For example, open a new Help to Buy ISA today, and max it out until mid-April 2019 and you’d have £4,000 in, meaning a bonus of £1,000.
“With a LISA you could put £4,000 in today, £4,000 in on 6 April 2018 (the start of the new tax year) and £4,000 in on 6 April 2019, so that’s £12,000 saved – a bonus of £3,000.
He explained, however, that when choosing you have to consider your personal situation.
Help To Buy ISAs
“Help To Buy ISAs are better for anyone aged 16+, with a max contribution of £200 a month (£1,200 in the first month).”
The max property purchase value is of £250,000 (£450,000 in London) and there is no penalty for taking the savings out without buying a home.
It can be used quickly, after £1,600 is saved, which can be as soon as three months, and you can use the bonus after completion on a property to reduce mortgage borrowing.
Lifetime ISAs
Alternatively, a lifetime ISA is for anyone aged 18 to 29, the maximum contribution is £4,000 per tax year and the max property purchase value is £450,000.
You lose £63 per £1,000 if you take cash out without buying a home, unless you’re older than 60.
You can use it from a year after the LISA was opened, and when buying a property it can be used during exchange and completion, so towards your house deposit and to reduce mortgage borrowing.
Martin summarised: “If you’ll definitely buy a home, for less than the LISA maximum of £450,000, are aged 18 to 39, and you won’t do it within a year, go for a LISA as you will get a bigger bonus.
“If you are older, need to buy quickly or you’re not 100% sure you’ll buy at all then it’s safer to stick with (or get) a Help to Buy ISA.”
Last week, Martin Lewis spoke about British Gas tariff switching, or switching to a different company, could save you money on your bills, while talking on ITV’s
