Martin Lewis' 'big problem' as he explains which ISAs you should get to hop on property ladder
11.01.2024 - 11:57
/ manchestereveningnews.co.uk
Many savvy savers may have some form of an Individual Savings Account (ISA) to prepare them for buying their first home.
However, with a couple of different ISAs on offer, it can be difficult to figure out which one best suits your needs. ISAs differ from other savings accounts in that they offer tax-free interest payments.
Lifetime ISAs and Help to Buy ISAs themselves differ even more in that they are specifically targeted at getting people on to the property ladder with their first home. Appearing on his ITV show, Martin Lewis was asked by one viewer if they should keep the cash they've saved in their Help to Buy ISA or switch to a Lifetime ISA.
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Martin explained that a Help to Buy ISA is "more flexible" while a Lifetime ISA can "give a bigger bonus". He further explained that Lifetime ISA's can be opened for anyone who has never bought a home aged 18 to 39 while the Help to Buy ISA is only closed for new applicants but "hundreds of thousands still have them".
In a Lifetime ISA, the state adds a 25 per cent bonus on a maximum of £4,000 saved each year for up to 31 years. Martin added: "The big problem with a Lifetime ISA is you get a 25 per cent bonus on what you've saved but if you withdraw for any other reason than buying a qualifying home or once you're aged 60 they'll take 25 per cent off."
He highlighted that 25 per cent of a large amount of money will ultimately cost more than 25 per cent taken off a smaller amount - in a Lifetime ISA, Martin equated this to a 6.25 per cent penalty. He noted that the main issue with the penalty right now is that the maximum price of a property that can be bought with a Lifetime ISA is
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