Best savings option for <12 month house purchase

Hi everyone

After a good few years of saving, we (me and my partner) are currently looking at buying our first house (both FTBs). We like the look of a new build development and it's likely that the plot we want becomes available for sale late this year/early next year at a cost of approx. 350k (would take 6 or so months to build from it being released for sale) . The property would be in Wales.

We have combined savings of approximately 35k (in a joint NatWest Savings Builder account) and are hoping to build on that in the coming months with possible contribution from family.

We've not really been savvy with our savings account and are coming to the game a bit late for optimal accounts. Therefore I had some questions I was hoping you could help with:

1) Assuming the plot becomes available in November (at earliest) and we need to exchange six weeks after, am I right in saying we've (just) missed the boat for a LISA (due to 12 months minimum before withdrawal)?

2) Would any other ISAs / schemes for FTBs benefit us (my research shows that it wouldn't)?

3) Assuming neither of the above - where would you recommend we put our savings (currently in the joint NatWest Savings Builder) to maximise its interest/bonus/return, considering we could have to withdraw in that window (potentially six weeks from November - worst case scenario)?

Thanks in advance!

Comments

  • Alexland
    Alexland Posts: 9,652
    First Anniversary Photogenic Name Dropper First Post
    Forumite
    So the property is above the HTB ISA price limit for outside London so that's not an option.

    The LISA 12 month rule applies from the initial contribution to the withdrawal of the money.

    For example if you pass across the exchange deposit in November (using money from elsewhere) then as part of the exchange you will agree the completion date over 12 months away from the LISA initial contribution you would be fine to use the LISA towards the completion payment. If not then don't use a LISA as the early withdrawal penalty would apply.

    If neither of these options are available then the house builder may have an incentive available and you have the normal choice of 5%/3% bank accounts and 5% regular savers (but you probably want to stick to easy-access ones like Nationwide or Santander) for the money you have remaining after paying the intial exchange deposit and legal costs.

    Alex.
  • Thanks for the response.

    A quick question following this week's MSE email....

    Does the LISA bonus get paid on completion? If so, when is completion for new-builds? Is it when we move in?

    As such, is this scenario possible:

    - Listing comes out in November/December 2018 - we put our reservation fee in.
    - We exchange in Jan 2019
    - The house is built post 5 April 2019 - on the above assumption this is when we "complete".

    For a LISA purpose: We each put £4,000 in today, each put in £4,000 in on 6 April 2018 and each put in £4,000 in on 6 April 2019. If we complete say, on 10 April 2018 - would we have a £6000 bonus between us?

    I suppose this all depends on a few things:

    1) When is the 'completion' for a house purchase?
    2) Our house MUST NOT be finished being built (i.e. 'complete') before 5 April 2019
    2) Does this mean we essentially get the £6,000 as additional liquidity (i.e. we still get the full mortgage, but the bonus pays some of the house so we are left with £6k of the mortgage in our bank account) as we wouldn't be in time to use the bonus for our deposit.

    Any advice would be appreciated. If any of that doesn't make sense let me know and I can explain again!
  • Alexland
    Alexland Posts: 9,652
    First Anniversary Photogenic Name Dropper First Post
    Forumite
    Hi,

    I spend less than 20 seconds scrolling down the long-winded padding in the MSE emails.

    Unlike a HTB ISA (where the solicitor claims the bonus) a LISA gets the bonus added into the account following the contributions. The first bonus for contributions this tax year (and HTB transfers from previous tax years) is due to be added to the account in April/May 2018. After that bonuses will be added shortly after contributions. So by circa May 2019 it should be possible to have £13k in a LISA.

    Your registered solicitor will draw the money from the LISA provider under your instruction (leave a month for admin/errors) - so it can be used for either the exchange deposit (the money you give the seller at exchange of contract when you commit to buy the property) or possibly later as part of the mortgage deposit (the total amount of money you are putting in) which is sent on the day of completion.

    Even if your house has finished being built you do not need to complete immediately - this may be negotiable with the house builder.

    Alex.
  • Hi Alex

    Thanks for the response!

    So I just want to be clear on two poinrts:

    1) The bonus

    If...

    I deposit £4k in March 18.
    I deposit £4k in March 19
    I deposit £4k in Mid-April 19.

    I will have a total of £12k deposited.

    By May 19, I I have a bonus of:
    - £1k from 2017/18 tax year
    - £1k from 2018/19 tax year

    If I withdraw at May 19 I will also be able to get
    - £1k from 2019/20 tax year

    Therefore a total of £15k withdrawn (i.e. a £3k bonus).

    If we both did this it would mean £30k withdrawn (i.e. a £6k bonus).

    Is that correct?

    2) The bonus funds

    Let's assume we pay an exchange deposit of 10% (£35k) in December 2018 and we have a mortgage agreed with an LTV of 90%.

    At completion we would have no mortgage deposit (as LTV is 90% and we've paid the exchange deposit of 10%), and be expecting a mortgage of £315k. How would we use the £6k? I understand the bonus withdrawal will then be paid direct to the conveyancer - does that mean we are left with £6k of our mortgage left in our bank account?

    Apologies for the continued questions - but we just want to be certain we're not locking our money away and not being able to access the benefit!
  • Alexland
    Alexland Posts: 9,652
    First Anniversary Photogenic Name Dropper First Post
    Forumite
    On point 1 yes but the withdrawal process might take a month so probably June 19 to be safe.

    On point 2 I don't understand how you are funding the exchange deposit in Dec 18 if you don't plan to withdraw from the LISA until June 19? When considering how much you need to borrow for the mortgage take into account your LISA account balance (Inc bonuses).
  • On point 1 - noted, thanks!

    On point 2 - Sorry I didn't explain that properly, so we anticipate between (additional) savings and family contribution, we should be able to find the house deposit separate to the LISA deposits of 24k. Therefore, when we withdraw in June 19, we will be withdrawing 30k (24k deposit + 6k bonus) already having paid the 35k exchange deposit (from separate savings/family).

    Therefore, if we still want to borrow the full 90% (315k) - is that still an option? Or are we only allowed to borrow 285k (i.e. less 30k)? This is as ideally, we would want that 30k as additional funds. So my question is whether once 30k from the LISA is provided to the conveyancer, whether we can effectively 'keep' 30k of our mortgage as additional funds in our account? (as this really would have been our deposit were it not for the timing issue of the LISA).

    Thanks! Happy to explain further if i'm not clear. Really appreciate the help!
  • Alexland
    Alexland Posts: 9,652
    First Anniversary Photogenic Name Dropper First Post
    Forumite
    Under the rules the LISA and Mortgage money needed to go into the property there is no option to withdraw them as leftovers after unless you can find a particularly dodgy solicitor.
  • Does the mortgage amount not come to me first, then get paid towards the property? As such, if I was obtaining a mortgage of 315k (which I would need to do in case the house completed before the LISA bonus was available), would I then need to go to the bank and request a smaller mortgage if the bonus did become available? Or would I still be allowed the 315k?
  • Alexland
    Alexland Posts: 9,652
    First Anniversary Photogenic Name Dropper First Post
    Forumite
    No the solicitor would draw both the LISA and Mortgage funds. Banks are not crazy enough to dump several hundred thousand pounds into your bank account. What if you went and spent the money in Vegas? You wouldn't have bought the property and the bank would have no security for the lending.

    Plan the dates properly and don't take the risk of withdrawing before the bonus payment date.

    Alex
  • So really the LISA bonus isn't worth it for me as I'd really need the bonus with my deposit, as that saves me actual cash. At completion the bonus only saves me ~2% of my mortgage which is negligible cash flow per month (wouldn't really reduce my rate). I understand my debt would be lower but the tangible benefit (i.e. cash in my pocket) would be negligible.

    And unfortunately the developer has confirmed that deposit needs to be paid within 5-6 weeks of release which is expected to be late this year - well before May/June 19 when I would get the bonus.

    Please correct me if i'm wrong.

    Otherwise, many thanks - this has been really useful!
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.2K Banking & Borrowing
  • 249.8K Reduce Debt & Boost Income
  • 449.3K Spending & Discounts
  • 234.4K Work, Benefits & Business
  • 606.7K Mortgages, Homes & Bills
  • 172.7K Life & Family
  • 247.2K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards