Opened a Help To Buy ISA... may not have been the right choice!
Louis_Miles
Posts: 3 Newbie
Hi All!
Me and my partner are currently saving for our first home and so recently both opened Help to Buy ISAs. We are not looking to buy very quickly (I had some debt issues in the past and am waiting for the defaults to clear from my record before we go mortgage hunting) so we are at least 2-3 years away from actually buying.
We are currently saving 200 pounds per month into one of the ISA's (my Partners), mine has only just been opened and has nothing in it yet... the plan is to basically have mine as a "bonus" pot for months when we can afford to save a little more.
So far so sensible BUT... we live in the Sussex which is not the cheapest place to buy a house and I am worried that by the time we buy we may well end up spending over the 250k limit to get the bonus from Help To Buy. I'm starting to think what we should have done was waited and opened a Cash LISA (should have researched more!) as this doesn't have the same restriction for the bonus.
My questions:
Is it possible to transfer the Help to buy ISA's into a LISA even though both HTB ISAs were opened this year (I know you can only pay into one per year but I couldn't find any information on transferring an ISA the year you open it...)
If the answer to the above is No can I cancel my new ISA (which currently has nothing in it) and open a LISA instead?
I believe that with a LISA you earn interest on the bonus... I don't think this is true of HTB ISA's(?) so does this mean that the overall interest is likely to be higher in a LISA if we are looking to save for say another 4 years?
And lastly would it be possible to open a LISA next tax year and then just move all the savings from the HTB ISA into 2 new LISA's (one in my name and one in my partners) as while we lose out on one years bonus presumably it would still work out more bonus in the long run?
Apologies for the wall of text post - saving is complicated! Thankyou if you had made it this far and really look forward to seeing what advice people have!
Me and my partner are currently saving for our first home and so recently both opened Help to Buy ISAs. We are not looking to buy very quickly (I had some debt issues in the past and am waiting for the defaults to clear from my record before we go mortgage hunting) so we are at least 2-3 years away from actually buying.
We are currently saving 200 pounds per month into one of the ISA's (my Partners), mine has only just been opened and has nothing in it yet... the plan is to basically have mine as a "bonus" pot for months when we can afford to save a little more.
So far so sensible BUT... we live in the Sussex which is not the cheapest place to buy a house and I am worried that by the time we buy we may well end up spending over the 250k limit to get the bonus from Help To Buy. I'm starting to think what we should have done was waited and opened a Cash LISA (should have researched more!) as this doesn't have the same restriction for the bonus.
My questions:
Is it possible to transfer the Help to buy ISA's into a LISA even though both HTB ISAs were opened this year (I know you can only pay into one per year but I couldn't find any information on transferring an ISA the year you open it...)
If the answer to the above is No can I cancel my new ISA (which currently has nothing in it) and open a LISA instead?
I believe that with a LISA you earn interest on the bonus... I don't think this is true of HTB ISA's(?) so does this mean that the overall interest is likely to be higher in a LISA if we are looking to save for say another 4 years?
And lastly would it be possible to open a LISA next tax year and then just move all the savings from the HTB ISA into 2 new LISA's (one in my name and one in my partners) as while we lose out on one years bonus presumably it would still work out more bonus in the long run?
Apologies for the wall of text post - saving is complicated! Thankyou if you had made it this far and really look forward to seeing what advice people have!
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Comments
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Louis_Miles wrote: »Hi All!
Me and my partner are currently saving for our first home and so recently both opened Help to Buy ISAs. We are not looking to buy very quickly (I had some debt issues in the past and am waiting for the defaults to clear from my record before we go mortgage hunting) so we are at least 2-3 years away from actually buying.
We are currently saving 200 pounds per month into one of the ISA's (my Partners), mine has only just been opened and has nothing in it yet... the plan is to basically have mine as a "bonus" pot for months when we can afford to save a little more.
So far so sensible BUT... we live in the Sussex which is not the cheapest place to buy a house and I am worried that by the time we buy we may well end up spending over the 250k limit to get the bonus from Help To Buy. I'm starting to think what we should have done was waited and opened a Cash LISA (should have researched more!) as this doesn't have the same restriction for the bonus.
My questions:
Is it possible to transfer the Help to buy ISA's into a LISA even though both HTB ISAs were opened this year (I know you can only pay into one per year but I couldn't find any information on transferring an ISA the year you open it...)
If the answer to the above is No can I cancel my new ISA (which currently has nothing in it) and open a LISA instead?
I believe that with a LISA you earn interest on the bonus... I don't think this is true of HTB ISA's(?) so does this mean that the overall interest is likely to be higher in a LISA if we are looking to save for say another 4 years?
And lastly would it be possible to open a LISA next tax year and then just move all the savings from the HTB ISA into 2 new LISA's (one in my name and one in my partners) as while we lose out on one years bonus presumably it would still work out more bonus in the long run?
Apologies for the wall of text post - saving is complicated! Thankyou if you had made it this far and really look forward to seeing what advice people have!
A Help to Buy ISA is a cash ISA. You can only pay into one cash ISA per year. In addition to a cash ISA you can also pay into a stocks and shares ISA, an innovative finance ISA and a lifetime ISA (whether cash or stocks and shares).
So you can pay into both a Help to Buy ISA and a lifetime ISA in a single year. You can also transfer funds in a Help to Buy ISA into a lifetime ISA at any time subject to your lifetime ISA provider accepting transfers in.
In a lifetime ISA, the bonus is paid into the account monthly based on what you contributed in the previous month with the first bonus not being paid until May 2018.
You can pay into a new lifetime ISA each year, but only one per year. With a Help to Buy ISA, you can only ever hold one (you can't pay into a new one each year).0 -
Thanks for your reply - I am still slightly confused however... Can I transfer the Help To Buy ISA into a Lifetime cash ISA this year? This would have given me two ISA's over the year but as one was transferred into another I would only end with one...
I think I have a plan going forward... comments on this welcome however!
- Keep paying into Help To Buy ISA until May 2018
- In May 2018 open new Life Time ISA's
- Throughout 2018 switch savings into Lifetime ISA.
- Some point around March 2019 withdraw funds from Help To Buy ISA and move them into Lifetime ISA's (shouldn't be an issue as we will be well below the maximum of 8000 (4000 in each Lifetime ISA).
- Some point 2020 or beyond - buy a house!0 -
Louis_Miles wrote: »Thanks for your reply - I am still slightly confused however... Can I transfer the Help To Buy ISA into a Lifetime cash ISA this year? This would have given me two ISA's over the year but as one was transferred into another I would only end with one...
There's nothing wrong with paying into more than one ISA of different types in a year. There's 4 ISA types that you can pay into per year as I said:
cash ISA
stocks and shares ISA
innovative finance ISA
lifetime ISA
You can pay into one of each of those in a year but not more than £20,000 across them all. A Help to Buy ISA is defined to be a special type of cash ISA. A lifetime ISA is a separate type of ISA altogether which can hold cash or stocks and shares, so you can have both a Help to Buy ISA and a lifetime ISA at the same time.
You can also transfer between any of these at any time if you want to.0 -
I was under the impression that you could only have a Help To Buy Cash ISA or a Lifetime Cash ISA in one year... if that isn't the case that certainly simplifies things!0
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Ed - you're the undoubted expert. But am i not right in saying Louis would only be able to use one of the ISAs to buy a house regarding the bonuses? Plus, potentially get far more bonuses on a LISA than a HISA.
Apologies, if covered above, i've only scanned read. Louis is right though...it is confusing for us laymen/women. I've asked you a question elsewhere btw! ;o)
Edit: On here:
http://forums.moneysavingexpert.com/showthread.php?t=56615830 -
If you cannot eventually use the HTB ISA because of the 250k limit is it any worse than a lifetime ISA? Does that have the same limit?
If you can transfer between the two how do the interest rates compare?0 -
Ed - you're the undoubted expert. But am i not right in saying Louis would only be able to use one of the ISAs to buy a house regarding the bonuses? Plus, potentially get far more bonuses on a LISA than a HISA.
Apologies, if covered above, i've only scanned read. Louis is right though...it is confusing for us laymen/women. I've asked you a question elsewhere btw! ;o)
Edit: On here:
http://forums.moneysavingexpert.com/showthread.php?t=5661583
From the MSE site:
Should I get a Help to Buy ISA or a Lifetime ISA?
The Lifetime ISA (LISA) launched on 6 April 2017, and just like the Help to Buy ISA, it gives a 25% bonus on top of what you save. The LISA is designed both to help you buy your first home, and to save for retirement, and can be opened by anyone aged 18 to 39.
The main difference is that you can save £4,000 a year in a Lifetime ISA, compared with £2,400 (£3,400 in year one) in a Help to Buy ISA. The bonus is also paid differently - with a Lifetime ISA it's paid annually until April 2018 and then monthly. Plus, with a LISA, you need to wait a year before using it to buy a home, and there's a penalty for early withdrawal.
You can have both a Help to Buy ISA and a Lifetime ISA
However you can only use the bonus from one of them towards buying a house.
Use the LISA for the 25% bonus to buy a home, you won't get the bonus with the Help to Buy ISA, but you can still keep the money plus the interest (and use it towards buying your home).
Use the Help to Buy ISA for the 25% bonus, and you'd have to pay a penalty to use your LISA savings for a property, though you would still be able to use it and get the bonus for retirement savings.
Point 13 on link below:
http://www.moneysavingexpert.com/savings/help-to-buy-ISA
Also:
You can transfer Help to Buy ISAs into LISAs to get the bonus on all the cash, but it's probably best to wait for now
The Help to Buy ISA was launched in December 2015, and like the LISA, it has a 25% bonus that's added to what you save, if you use it towards a first home.
You can have a Help to Buy ISA and a LISA.
However, you can only use the bonus from one of them towards buying a home.
Use the LISA for the 25% bonus to buy a home and you won't get the bonus with the Help to Buy ISA, but you can still keep and use the money plus the interest.
Use the Help to Buy ISA for the 25% bonus and you'd have to pay a penalty to use your LISA savings for a property. Though you'd still be able to use it and get the bonus for retirement savings.
On the second point 6 on link below:
http://www.moneysavingexpert.com/savings/lifetime-ISAs#property6
Clear as mud for me! :huh:0 -
Is MSE aware that the small print of the Skipton LISA page says that they reserve the right to withdraw this facility (i.e. transferring your HISA into your LISA)?0
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Is MSE aware that the small print of the Skipton LISA page says that they reserve the right to withdraw this facility (i.e. transferring your HISA into your LISA)?
Oh dear! Why cant life be simple? All these rules and small print are farcical imo. Talk about making it as difficult and complicated as possible. _pale_0 -
The LISA limit is £450K throughout the UK, whereas the HTB is £450K only in London and £250K elsewhere.Norman_Castle wrote: »If you cannot eventually use the HTB ISA because of the 250k limit is it any worse than a lifetime ISA? Does that have the same limit?
If you can transfer between the two how do the interest rates compare?
There's only one cash LISA provider so far (Skipton) and the interest rate is poor at 0.5%, but the interest on HTBs and LISAs is less significant than the 25% bonus anyway....
Worth reading the two MSE articles for further information, as these answer the above questions and many more:
http://www.moneysavingexpert.com/savings/lifetime-ISAs
http://www.moneysavingexpert.com/savings/help-to-buy-ISA0
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