Lifetime ISAs guide

dfbefore30

I opened a Skipton LISA on 6th June (I was told I was only the second person in my city to open one. That's how eager I was!). I have saved my full allowance and as soon as the account matures, I will be in a position to buy.

My question is when can I start looking? I was thinking around March/April given that the conveyancing process can take a while, but is this too soon?

Alexland

NevvyC wrote: »

Oh sorry I may have misread the inflection of your reply ... My point being that I'm not sure which would earn the higher value of £ : the LISA (with all those juicy thousands now in, earning 0.75%, compounding) vs the Nationwide 5% reg saver (with much smaller amounts) compounding...

Interest is earned by the day. It's obviously better, on any given day, to get 5% interest the 100% of the contribution than 0.75% interest on 125% of the contribution.

As such it always makes sense to pay the LISA money in towards the end of the tax year, holding the money in much better accounts, even if it means you delay getting the 25% bonus.

However with the regular saver it's a bit more complicated as you have the monthly limit so would need to find somewhere else to earn good interest (anything around 1% or higher would be better than the LISA with earlier bonus) on any other money you have before it can go into the regular saver.

Alex.

System

Hmm, even if you whacked 4K in ASAP at the very start of the new tax year (releasing another 1K govt bonus also ASAP) meaning you'd be getting 0.75% of everything in there (including this new, latest 1K bonus...)

Does the 5% on monthly deposits of £250 starting at zero balance still earn more in interest than the scenario above ? (where, admittedly, the interest earning power is a lot less, 4.25% less even ... But is applied on a larger amount (eg. a free 1K of capital as soon as released also powering interest) ??



EDIT: re-reading, it seems this scenario is what you refer to (re. 5% on 100 vs 0.75% on 125) if I'm getting you correctly ...

As for the monthly reg saver limit I'll be starting from scratch again anyway after depositing my 4K this tax-year and can likely only afford to do the £250 into the reg saver each month and always aim to get it in there on the first of the month to earn maximum potential - so wouldn't need to look at comparing any other further products and just the 2 best options keep it nice & simple (aside from that I hold my everyday funds in current accounts that pay 3% up to 1.5K and 2.5K so plenty of headroom without the need for more products at this time!)



EDIT 2: I think my head just goes round in circles with this stuff I swear ! Haha... Another thing to consider, like you say, is the monthly reg saver cap ; so whereas you could chuck a fresh 4K in the LISA as soon as the new tax year begins (and hence release the next 1K bonus ASAP after that) - you're earning 0.75% on the lot from the get-go (compounding) whereas with the reg saver you only build it up in £250 blocks, monthly so ergo only get 5% compounding on 250 ... 500 ... 750 ... 1K etc. (which again brings my head back to the original scenario I addressed of which has the better earning potential vis-a-vis interest of these 2 strategies ???) As realistically, whilst I say I'm starting from scratch again (zero balance) with the reg saver (since its capped and that's the restrictive criterion of the account) I may still be able to juggle things so that I have a fresh 4K ready-to-go in the new tax year (like I say, for example, everyday funds up to 1.5K & 2.5K earning 3% in current accounts as well as the opportunity to sell off assets from my business if it's worth doing-so...)



EDIT 3: I've probably answered my own predicament there (with the 3% current accounts) see what I mean about head going round & round :rotfl:

Alexland

NevvyC wrote: »

I've probably answered my own predicament there (with the 3% current accounts) see what I mean about head going round & round :rotfl:

Keep it simple - on any given day you want your money in the best place to earn the best interest rate and then towards the end of the tax year you want to move it into the LISA for the 25% bonus. As long as you are getting around 1% or more you are doing better than the LISA with earlier bonus scenario.

Yes your high interest strategy is likely to use a mix of Regular Savers and other savings accounts.

Alex.

Alexland

Kim_13 wrote: »

One Family have launched a S&S LISA with a choice of two funds: https://www.onefamily.com/lifetime-isa/

1% AMC and 0.3% Investment Costs is pretty unappealing - to be avoided alongside Moneybox and The Share Center. I believe that Skipton, Nutmeg, AJ Bell and HL all have a good LISA offer for different target audiences.

Alex

Alexland

dfbefore30 wrote: »

I opened a Skipton LISA on 6th June (I was told I was only the second person in my city to open one. That's how eager I was!). I have saved my full allowance and as soon as the account matures, I will be in a position to buy.

My question is when can I start looking? I was thinking around March/April given that the conveyancing process can take a while, but is this too soon?

If you are in Scotland the conveyancing process is generally quicker as some of the searches have been done upfront. Otherwise in the rest of the UK the process generally takes 2-4 months. Our current property took 5-6 months as the seller wanted to arrange the completion date around school holidays.

The point at which you need money in the process also depends on if the seller requires a deposit upon exchange of contracts (and if you can fund this from cash without drawing on the LISA). The amount of exchange deposit is negotiable but is usually 5% to 10%.

Don't confuse the exchange deposit (the money you agree to give the seller in advance) with the mortgage deposit (the proportion of the property you will own, that defines the LTV ratio). You will also need some cash to pay initial fees which should not come from the LISA.

Sometimes it is possible that the seller will agree to exchange and complete on the same day at the end of the process so no exchange deposit is required. However if the seller is buying another property then their seller may require an exchange deposit so money needs passing up the chain.

Alex.

Kreacher

Alexland wrote: »

I agree that doesn't make sense if you have contributed 10 months at £200 into the HTB and £100 to the LISA. Is there any possibility you missed a HTB contribution or your April contribution was before the 6th?? Also Skipton have probably not received the interest information from your HTB provider.

Hmmm, I don't know! What would happen if I transfer in £2100 and it's too much?

Alexland

Kreacher wrote: »

Hmmm, I don't know! What would happen if I transfer in £2100 and it's too much?

Do you not have any records of your HTB ISA contributions? For example if you were contributing on the 1st of the month then the April contribution would be last tax year and this would all make sense.

Kreacher

Alexland wrote: »

Do you not have any records of your HTB ISA contributions? For example if you were contributing on the 1st of the month then the April contribution would be last tax year and this would all make sense.

Yes £2100 makes sense as my contributions were the 1st of the month. It's the interest part that's confusing me as Skipton have told me I can add £2100.

Alexland

Kreacher wrote: »

Yes £2100 makes sense as my contributions were the 1st of the month. It's the interest part that's confusing me as Skipton have told me I can add £2100.

That's because your old HTB ISA provider have not told them the amount of interest earned during this tax year. If you have no records the I suggest you contact Skipton and ask them to clarify with your old provider and let us know how that goes?

Alex