Help to Buy ISA guide

Alexland

You may find the additional legal costs outweigh the benefit of the HTB ISA bonus - a formal sale may require you and your partner to appoint different solicitors. Much harder than adding a name to the land registry and mortgage.

Sehzy

My savings advisor Told me this at the bank.. is it true?
I am currently saving for my first house with a help to buy isa and a standard savers. With 200 to max my Help to buy and 400 in a standard savers.

When I purchase, is the bonus paid on what’s in my help to buy only or does it get calculated on my total deposit like the bank said?

Thanks

eskbanker

Sehzy wrote: »

My savings advisor Told me this at the bank.. is it true?
I am currently saving for my first house with a help to buy isa and a standard savers. With 200 to max my Help to buy and 400 in a standard savers.

When I purchase, is the bonus paid on what’s in my help to buy only or does it get calculated on my total deposit like the bank said?

Thanks

Some sort of misunderstanding going on here, but the 25% bonus relates specifically to the balance of the Help to Buy ISA and not other accounts....

Charlottek

Hi I am looking at buying my first house in 2/3 years. I currently have around 8,000 in a help to buy ISA but have now been looking into the LISA.
Is it better to keep going with the help to buy or should I change to a lifetime ISA?

Alexland

Charlottek wrote: »

Hi I am looking at buying my first house in 2/3 years. I currently have around 8,000 in a help to buy ISA but have now been looking into the LISA.
Is it better to keep going with the help to buy or should I change to a lifetime ISA?

The problem is that it would take you 2 tax years to re-wrap the HTB ISA money into a LISA.

Assuming you have enough remaining ISA allowance then you could do £4k in the remainder of this tax year (just over 3 months) and then another £4k next tax year. However it means you won't be able to contribute any new money until the subsequent tax year starting 06 April 2020 - although you will then be able to contribute £4k at anytime versus the HTB ISA limit of £200 per month.

As such it really depends on when the property purchase will occur.

Would the property you expect to buy be within the HTB ISA price cap anyway?

Alex.

eskbanker

Charlottek wrote: »

Hi I am looking at buying my first house in 2/3 years. I currently have around 8,000 in a help to buy ISA but have now been looking into the LISA.
Is it better to keep going with the help to buy or should I change to a lifetime ISA?

A simple question but not a simple answer!

Advantages of LISA over HTB include a higher annual contribution allowance (£4K v £2.4K), a higher property value cap outside London (£450K v £250K) and access to bonus money at exchange time, but disadvantages include lower interest rates and more restrictions on withdrawals. More differences explained at https://www.moneysavingexpert.com/savings/lifetime-isas/#property-6

As it isn't possible to get the 25% bonus from both products towards a first-time property purchase, you effectively have to decide which one you'll support fully, although if you have enough money available you can fully fund a LISA while also feeding a HTB for the interest rate rather than the bonus.

If you chose to move your £8K HTB pot over to a LISA it would take two separate tax years to do so, during which time you could continue to fund your HTB, and then at the start of 2020/21 you could move the remaining contributions over.

How much are you anticipating being able to save each month and what value of property do you expect to be buying?

Charlottek

I would keep putting 200 a month into the HTB but transfer 4000 a year from it into the LISA.
I’m not too sure how much the property would be but I am looking to buy in the south west and think realistically it would be above 250,000.

Alexland

Well if you are buying above £250k but below £450k in the south west then the HTB ISA is only good for the interest rate and your priority should be getting £4k per tax year in a LISA for the 25% bonus.

Read all the LISA T&Cs carefully as it is a complicated product.

tryingtosave85

I've been reading all about these HTB ISA's and also the LISA and i'm a bit confused about how to make them both work for me.

I have a small amount of savings and i've just opened up a HTB ISA and put the max £1200 in for the first month, but I still have a bit more in savings that I could put somewhere else?

I am also thinking about my future as i've not really been paying into a pension since I started a limited company and started working for myself.

It's unlikely that i'll be in a position to buy for another year so should I invest the max into both my HTB and a LISA? But if I decide to then take money out of the LISA to go towards a deposit on a house - how much will I be penalised by the ISA and will i still be eligible for the bonus from the govt at 60 (using the 25% govt bonus on the HTB rather than the LISA).

I now that both the HTB and LISA will have a maximum I can save - so if I manage to save further on top of that do I just go for a high interest savings account?

Any help or advice would be much appreciated!

Alexland

With a HTB ISA you do the withdrawal and the solicitor claims the bonus.

With a LISA the provider claims the bonus and adds it into your account about a month after each contribution. You can either withdraw the money without penalty at 60+ or your solicitor can make a penalty free withdrawal for a qualifying property purchase after the account has been open 12 months.

One person cannot use both products to support a property purchase however there is no penalty to withdraw money from the HTB ISA without claiming the bonus.

Alternatively you can buy a qualifying property with the HTB ISA (and your solicitor will claim by the bonus) and use the LISA (inc bonuses) towards retirement. If doing this a S&S LISA would be most suitable as if invested sensibly the money is likely to grow at or above inflation.

Yes if you have more money leftover you can just use any other high interest current or savings account.

You would not be allowed to contribute into another Cash ISA (HTB ISA is a type of Cash ISA) unless you went with a provider who offered a Split Cash ISA.

Alex