Saving for a house can be difficult and often takes time, but there are certain money-saving schemes available that can help your financial situation.

For example, some Individual Saving Accounts (ISAs) allow you to save or invest money in a tax-efficient way.

This includes Help to Buy ISAs and Lifetime ISAS, but what is the difference and should you swap from one to another?

The Money Saving Expert founder, Martin Lewis, recently offered this advice on how first-time buyers can get £1,000s free towards their home as they try to get onto the property ladder.

What does Martin Lewis say about ISAs?

On a recent episode of The Martin Lewis Money Show, one viewer asked if they should keep putting money into their Help to Buy ISA or swap to a Lifetime ISA.

Martin said: “Help to Buy ISA is more flexible. The Lifetime ISA can give you a bigger bonus.”

As he pointed to a graphic on-screen during his ITV show, he explained: “Look, these are all about first-time buyers ISAs.

“So these are people who have never owned a home before.

“The Lifetime ISA is the one that you can open now if you’re aged 18 to 39. The Help to Buy ISA is closed to new applicants but hundreds of thousands of people have them.”

Who is Martin Lewis?

He added: “Let me focus on the Lifetime ISA first, as with the Help to Buy ISA, the state adds 25% on top of what you’ve saved – you can put in a maximum of £4,000 a year. So that means £1,000 of free money from the state each year for up to 31 years.

“The big problem with the Lifetime ISA – you get a 25% bonus on what you have saved, but if you withdraw it for any other reason than buying a ‘qualifying’ (key term home), or once you’re age 60 they take it 25% off. And those who are good at maths will know 25% on a bigger amount is more than 25% on a smaller amount.

“Which effectively means a 6.25% penalty. Put it in practical terms, you max it out, you’ve got £20,000 in it.

“After a number of years, you take it out not to buy a ‘qualifying’ house, you take out £18,750. You give the state over £1,000 of your money.

“The problem, the maximum property price you can buy is £450,000. You cannot buy a house above that. That hasn’t changed since 2017, even though house prices have gone up.”

Martin said this means if you wanted to buy a bigger property, you would have to pay the penalty.

It’s important to note that once you open a Lifetime ISA, it must be open a year before you can receive the first-time buyer bonus.

He added: “So my big tip to anyone this may be worthwhile for, get £1 in.”

This is because once that’s in and you have been adding to it, you can get the bonus.

Recommended reading:

When compared to the Help to Buy ISA, Martin says it “loses in every category except one” – the “withdrawal penalty.”

He commented: “If you want to take your money out of a Help to Buy ISA, there is no penalty.”

Therefore, “the answer is, if you’re definitely buying a ‘qualifying’ house and you want to max it out, the Lifetime ISA is better for you,” he concluded.

“If you’re not definitely, it’s safe to keep it in a Help to Buy ISA.”

The Martin Lewis Money Show continues on ITV1 and ITVX on January 23 from 8pm.