Help to Buy ISA guide

grumiofoundation

Manisha28 said:

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? 

Short answer - Yes.

Can pay into both but only use the bonus from one for buying a house. 

Don't forget as the LISA contribution limit is based on tax year (not calendar) you can pay £4000 in before end of this tax year and another £4000 in April (next tax year) so can have contributed £8000 within 3 months (can't use LISA to buy home until has been open for 12 months but from your post this seems not to be an issue). 

Alexland

Manisha28 said:

So my question is can I pay into both and decide what I want to do later down the line? 

Yes but remember that if you don't use the LISA then from 6th April the withdrawal penalty before age 60 is going back up again so £4000 contributed plus £1000 (25%) bonus equals £5000 but withdrawal penalty would be £1,250 (25%) leaving £3,750 so effectively 6.25% penalty against the original contribution.

Manisha28

grumiofoundation said:

Manisha28 said:

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? 

Short answer - Yes.

Can pay into both but only use the bonus from one for buying a house. 

Don't forget as the LISA contribution limit is based on tax year (not calendar) you can pay £4000 in before end of this tax year and another £4000 in April (next tax year) so can have contributed £8000 within 3 months (can't use LISA to buy home until has been open for 12 months but from your post this seems not to be an issue). 

Thank you!! That’s really helpful 

Manisha28

Alexland said:

Manisha28 said:

So my question is can I pay into both and decide what I want to do later down the line? 

Yes but remember that if you don't use the LISA then from 6th April the withdrawal penalty before age 60 is going back up again so £4000 contributed plus £1000 (25%) bonus equals £5000 but withdrawal penalty would be £1,250 (25%) leaving £3,750 so effectively 6.25% penalty against the original contribution.

Thank you!! I will definitely use the LISA as I can save more using it and I can essentially buy any price house I want (I defo won’t be buying a house more than £450K). I think HTB can just be good as a savings pot for now. 

fdsa987

Hi, I have a help to buy ISA with nationwide (1% interest) and was wondering whether it's worth it to switch to HSBC (1.7% interest).

However, before the rates were cut (in 2019), nationwide had a higher rate (at 2.5%) compared to HSBC (2.25%). So I'm wondering whether it's worth waiting until rates go back up again as I'm assuming nationwide will have a higher rate then.

Also, once switched to HSBC, I won't be able to switch back to nationwide.

masonic

fdsa987 said:

Hi, I have a help to buy ISA with nationwide (1% interest) and was wondering whether it's worth it to switch to HSBC (1.7% interest).

However, before the rates were cut (in 2019), nationwide had a higher rate (at 2.5%) compared to HSBC (2.25%). So I'm wondering whether it's worth waiting until rates go back up again as I'm assuming nationwide will have a higher rate then.

Also, once switched to HSBC, I won't be able to switch back to nationwide.

What is the balance of the HTB ISA (some HTB ISAs have tiered interest rates, so you should watch out for this), and how long do you think it will be before you buy?

I wouldn't assume HTB ISA rates will ever go back up.

belgarion

Hi. My grandmother passed away several months ago and left me £20k in her will which she wanted me to use towards a house deposit. I am 25 and not intending to buy a house for at least a few years. Should I open a LISA now 20/21 tax year and invest max £4K and open a cash ISA and put the balance in there. Then in April 21/22 tax year invest another £4K in LISA transferred from cash ISA and then each subsequent tax year transfer £4K from cash ISA to LISA. 

grumiofoundation

belgarion said:

Hi. My grandmother passed away several months ago and left me £20k in her will which she wanted me to use towards a house deposit. I am 25 and not intending to buy a house for at least a few years. Should I open a LISA now 20/21 tax year and invest max £4K and open a cash ISA and put the balance in there. Then in April 21/22 tax year invest another £4K in LISA transferred from cash ISA and then each subsequent tax year transfer £4K from cash ISA to LISA. 

If the money will be used for a house purchase then Yes LISA is your best bet and very sensible to utilise this years allowance. 

Do you actually need to use a cash ISA? Best interest rate available is currently 0.55% for easy access. You might want to look at premium bonds - although not guaranteed with average luck over a decent period of time you should get ~0.8%. 

Alexland

belgarion said:

Hi. My grandmother passed away several months ago and left me £20k in her will which she wanted me to use towards a house deposit. I am 25 and not intending to buy a house for at least a few years. Should I open a LISA now 20/21 tax year and invest max £4K and open a cash ISA and put the balance in there. Then in April 21/22 tax year invest another £4K in LISA transferred from cash ISA and then each subsequent tax year transfer £4K from cash ISA to LISA. 

By the time you get around to buying given normal property price inflation will the £450k LISA price cap be restrictive for where you live? Especially if you end up buying and combining your purchasing power with another person such as a partner etc.

golfonsaturdays

That sounds like a very good idea, to drip feed £4000 each tax year into the LISA, you can deposit £4000 before end of March and then another £4000 a month later, with the bonuses added that will be £10,000 in there. You can add each year but keep the rest of your inheritance elsewhere pending transfers. Just be aware that money in a LISA is a commitment, if you didn't buy a property and wanted the money out for another reason (aside from pension) you would pay a penalty. The £450,000 cap might be a consideration, it depends how long you wait before you buy, property values where you live, and what you might buy, ie flat/house.