Help to buy ISA - advice for the meantime

sephseph

Official MSE Insert:

You may also find our fully researched Help to Buy ISA guide helpful.

Back to the original post...


I'd like to open a help to buy ISA, but from what I understand, they're not available just yet.

I've recently inherited my money, and I'd like some advice as to what to do with it while I'm waiting for these help to buy ISAs to become available.

As far as I'm aware, if I open a regular ISA, I won't be able to open a help to buy ISA as soon as they become available later this year.

SO....can anyone suggest a good place to put this money in the meantime, so I can transfer it to the new ISA when they get released to the public?

Thanks!

pip895

If you open your isa on or before the 3 April 15 you will use this years allowance not next.

clarky_cat

Depending on how much you've got you can put £20,000 in the Santander 123 acc with 3% interest, Club Lloyds also offer 4% interest if you put £5,000 in. Both of these are better than current cash ISA interest rates.

Archi_Bald

Perhaps put the money into an interest paying current account - that's a good place to feed into your HTB ISA anyway. How much money is involvd?

bowlhead99

It depends how much you have. If you have about £2k you can stick it in a TSB or Nationwide current account and get 5% p.a. If you have £4-5k you can stick it in a Lloyds current account and get 4% and also drip a bit more into a regular saver account up to £400pm. If you have more than that up to £20k you can stick it in a Santander current account and get 3%.

You can have more than one account, so for example if you inherited £9k you could open a Lloyds account and a TSB account and a Nationwide one and max them all out, or you could just get one Santander one for simplicity but a lower overall interest rate.

You will probably find the rates on those accounts, after paying tax, to still be far higher than any ISAs, so there is no point having a 'normal' ISA at the moment.

The Help to Buy one would be useful because you get a free top up on what you put in, but you can only build up that account slowly at £200pm. So for example, if you had a £5k deposit that you'd already inherited, you could save that for now, then contribute a lump sum of £1000 to open the HtB ISA, and then contribute the max £200pm into the HtB ISA for about 5 months, at the end of which you'd have £2000 total in the ISA and then get the government to give you a bonus of 25% (£500 on that £2000) when you use that as part of your deposit.

So, in half a year you earn £500 tax free from the government which will be nice. But the rest of your deposit money should just sit in whatever high paying accounts you can find. The HTB ISA will only be available from Autumn so realistically to get £500 worth of freebie you would need to wait until early next year to have the time to have dripped a few lots of £200 into the account. If you've already inherited your deposit, and have enough spare savings and salary to buy now, there is probably not a lot of point waiting an entire year from now just to get the £500 free, because the house price might have gone up £500 by then anyway.

Obviously if you have a lot more savings to go before your deposit and income situation is really good enough to get a house, you could spend almost 5 years putting away the money in the account and build it up to £12000 and get the max £3000 free. Of course, if your target house price rose by £3000 in the five years it is a false economy. This government sweetener is really most useful for those who are taking a long time to build their balance up, not for someone who has recently inherited their money and is ready to go.

sephseph

Thanks for the advice!

I'm going to pay off some debt, after which I'll be left with about £4k.

I'm hoping to try and save between £200-£400 per month on top of this.

Archi_Bald

Your best accounts would be a Nationwide FlexDirect and a TSB Plus, both 5% AER, as they pay the most interest and don't have a minimum balance requirement. The FlexDirect 5% will last one year only.

After that, once or two Tesco current accounts (3% AER) could be good as again, they don't have a minimum balance.

Drip-feed your HTB ISA from one of these accounts.

The Lloyds and Santander accounts all require minimum balances for half decent interest so they may not be suitable.

sephseph

Archi_Bald wrote: »

Your best accounts would be a Nationwide FlexDirect and a TSB Plus, both 5% AER, as they pay the most interest and don't have a minimum balance requirement. The FlexDirect 5% will last one year only.

After that, once or two Tesco current accounts (3% AER) could be good as again, they don't have a minimum balance.

Drip-feed your HTB ISA from one of these accounts.

The Lloyds and Santander accounts all require minimum balances for half decent interest so they may not be suitable.

Would this mean I have to change my main current account from one of this?
Ideally I'd like to keep the savings separate from my current account to avoid any temptation of dipping into them

jimjames

sephseph wrote: »

Would this mean I have to change my main current account from one of this?
Ideally I'd like to keep the savings separate from my current account to avoid any temptation of dipping into them

Nope. No need to change current accounts at all.

sephseph

jimjames wrote: »

Nope. No need to change current accounts at all.

But a lot of them have a minimum amount each month to be paid in, that exceeds the amount I want to save per month (£300-£400)

colsten

You simply use the money you already have to satisfy the minimum monthly deposit requirements.

Say you have £2,000 in account A, £2,000 in account B and £3,000 in account C. Account A and B require £500 a month, and account C £750. For simplicity, just cycle £750 through all the accounts, by Standing Order, all on the same day i.e. A -> B, B -> C, and then C -> A.

Not a penny of new money needed.