Help to Buy ISA guide

Ren911

Hi, I was wondering if anyone can offer advice please.
 I am going to apply for a mortgage with a relative,  we will both be first time buyers. They will pay the mortgage with their partner, myself and my relative's salary combined puts us in a better position to be accepted for Help to Buy loan & Mortgage than with their partner. 
I have a Help to Buy ISA, I will not be using it to help purchase my relative's potential property, as I had planned to use it for myself  in future. But alas, circumstances change... I wanted to ask if I should close my Help to Buy ISA now, as now I'm pretty sure I can not use it to buy my own property in future, as I will not be a first time buyer? Or should I wait a little further down the line.

Thanks in advance 

Alexland

There's no hurry to close the HTB ISA if the interest rate is good and it keeps your options open incase the proposed purchase does not occur for whatever reason. Once you do own property you are no longer allowed to hold a HTB ISA so if it wasn't used it needs closing. If you are entering into a bespoke family arrangement then ensure your solicitor understands to identify risks and protect your interests.

DiggerUK

Advice for son and girlfriend. 

My son opened a HTB ISA before they were withdrawn and has kept it maxed.
Both he and his girlfriend plan to buy together one day. 

She is going to open a cash LISA asap with a lump sum.
He is planning on stopping contributions to the HTB and opening a cash LISA with a  lump sum asap, and then transfer the HTB to the LISA.
I have advised that he should wait till end of tax year before stopping HTB and opening his LISA to comply with rules, which is the only problem I have with the proposed plan. Is what he proposes allowable?

It's a longtime since I've fact checked t&c's on ISA's and I need a second opinion. 

Thanks, DiggerUK..._

masonic

DiggerUK said:

Advice for son and girlfriend. 

My son opened a HTB ISA before they were withdrawn and has kept it maxed.
Both he and his girlfriend plan to buy together one day. 

She is going to open a cash LISA asap with a lump sum.
He is planning on stopping contributions to the HTB and opening a cash LISA with a  lump sum asap, and then transfer the HTB to the LISA.
I have advised that he should wait till end of tax year before stopping HTB and opening his LISA to comply with rules, which is the only problem I have with the proposed plan. Is what he proposes allowable?

There is nothing to stop him opening a LISA right now and contributing to it alongside the HTB ISA as they are different types of ISA and I assume he hasn't maxed out his overall £20k allowance. Any part of the £4k LISA allowance he can't fill using new money can be filled by transferring from the HTB ISA (this can be a formal transfer or just a withdrawal and deposit if there is headroom in his £20k allowance he won't use). The HTB ISA is useful as a savings account if it has a higher rate of interest, so no point in depleting it unnecessarily. He can keep it until he becomes a homeowner.

DiggerUK

So, if this year my son goes max HTB + max LISA + ISA = £20,000, then all ok. 

Girlfriend can max LISA + ISA = £20k.

They don't have enough to do the full £40k between them, but they can both max the LISA this year and thereafter. and he can also continue to max the HTB. They can check ISA/ savings rates for themselves to see were the extras go. (They've both recently got promotions with nice pay prospects) 

When should he consider transferring the HTB to the LISA to consolidate the HTB bonus. Many thanks, DiggerUK..._

masonic

DiggerUK said:

So, if this year my son goes max HTB + max LISA + ISA = £20,000, then all ok. 

Girlfriend can max LISA + ISA = £20k.

They don't have enough to do the full £40k between them, but they can both max the LISA this year and thereafter. and he can also continue to max the HTB. They can check ISA/ savings rates for themselves to see were the extras go. (They've both recently got promotions with nice pay prospects) 

When should he consider transferring the HTB to the LISA to consolidate the HTB bonus. Many thanks, DiggerUK..._

The LISA £4k limit cannot be breached, even with transfers from other types of ISA. In the tax year LISAs were first introduced there was the option for a one time transfer from HTB ISA to LISA in addition to the £4k limit, but after that time it has been strictly £4k flowing into a LISA per tax year from any source. So based on what you say about his ability to fill the LISA independently, most likely little to none of his HTB ISA money will end up in his LISA.

If his HTB ISA balance is already quite large, and he ends up buying in the short term, he may achieve a bigger bonus from the HTB ISA (if the purchase qualifies under those stricter scheme rules), in which case he might have pause before putting money into a LISA unless he'd be ok with switching it to a S&S LISA for retirement if he decided to buy within, say, 2-3 years.

DiggerUK

Do I understand correctly that both the  HTB  and the LISA funds, plus accrued   bonuses, can be liquidated and used towards the house purchase simultaneously..._

grumiofoundation

DiggerUK said:

Advice for son and girlfriend. 

My son opened a HTB ISA before they were withdrawn and has kept it maxed.
Both he and his girlfriend plan to buy together one day. 

She is going to open a cash LISA asap with a lump sum.
He is planning on stopping contributions to the HTB and opening a cash LISA with a  lump sum asap, and then transfer the HTB to the LISA.
I have advised that he should wait till end of tax year before stopping HTB and opening his LISA to comply with rules, which is the only problem I have with the proposed plan. Is what he proposes allowable?

It's a longtime since I've fact checked t&c's on ISA's and I need a second opinion. 

Thanks, DiggerUK..._

As masonic says makes sense to open LISA ASAP. This way can contribute 4k this tax year before April 2021 to maximise bonus (and get 12 month clock ticking). 

Cash LISA is a different type of ISA to a cash ISA (HTB ISA is a cash ISA) so is fine to open and contribute to both HTB ISA and cash LISA in same year.

When should he consider transferring the HTB to the LISA to consolidate the HTB bonus. 

No real need to transfer HTB -> LISA as can have both and cannot 'consolidate' bonus (see reply below) if can fund LISA without needing to do this.  HTB ISA may still be a better rate?

DiggerUK said:

Do I understand correctly that both the  HTB  and the LISA funds, plus accrued   bonuses, can be liquidated and used towards the house purchase simultaneously..._

No. An individual only use bonus from HTB OR LISA towards house purchase.
A couple buying could use one of each e.g. Son uses HTB and girlfriend use LISA but in this case sounds like may be more attractive for them both to use LISA? (potential for higher bonuses and if use HTB and LISA house has to comply with rules of both, e.g. limited to 250k outside London etc).

DiggerUK

They are set on as maximum a down payment as possible. The LISA route would have been a better choice for him to have pursued earlier  due to the larger bonuses it allows. Too late to change that now.....spilt milk.
I think both should max the LISA's, anything extra in highest rates. Don't know what to suggest with the HTB.....If in doubt, do nowt, take a time out. Four years is plan A for now with a £40k minimum target for a deposit. 

First world kids today, I ask you. Thanks..._

Edit, his girlfriend just pointed out that HTB bonuses are only realised at purchase time and are not accrued. So they are transferring HTB balance with top up to the £4K this year. Penny dropped..._

Manisha28

Hi, I have a HTB ISA and maxing the £200 a month (have around £4.5K in there), I want to definitely buy a house in the future (more than a year away) and I’m unsure if the house will be more than £250K.
Can I open a LISA and use put £4K in that every year as well as putting £200 in my help to buy so I have both options? I’m thinking I’ll likely use the LISA and then just use the help to buy as a high interest savings and take out the amount when I buy a home eventually as I know you can’t have it when you own a home and I’m fine with losing the bonus as I would of use the LISA. So my question is can I pay into both and decide what I want to do later down the line?