Lifetime ISAs guide

System

NevvyC wrote: »

Quite, I wouldn't want to leave it too late incase of any issues with the final subscription for the year just for a (few?) extra quid elsewhere however...

Getting 3% elsewhere on the sum (which obviously beats the Skipton 1%...) but then if I lump it into my LISA before the 5th(?*) it seems this would be inline with "month 2" meaning I would see my 'hefty' bonus within 14days of the 20th of the same month (instead of having to wait an additional month to see it... And thus, be earning 1% on that stake of bonus also in that timeframe...)


*working from memory :rotfl: !


EDIT: perhaps I should have clarified, I meant "maximising the interest" in terms of on the 25% bonus amount received sooner rather than later with an ASAP/earlier final subscription for the year...

masonic wrote: »

Let's compare two scenarios:

1) You pay in £4k on 5th March - the last date to qualify for the April bonus payment - and therefore receive your bonus on the 27th April March.

2) You pay in £4k on 3rd April - to be safe of not missing the end of the tax year - and therefore receive your bonus on the 27th May April.

In scenario 2 you will gain interest at 3% on £4k for 29 30 days, which is £9.53 £9.86
But you will lose interest at 1% on £1k for 30 days, which is £0.82

So overall you will be £8.71 £9.04 better off delaying by a month.

Edit: In fact, just three extra days interest at 3% on the amount paid into the LISA is enough to offset a one month delay in receiving the bonus on the amount paid in.

Thanks for this, just helps to get fresh eyes on things a lot of the time! Since the last subscription I made went in same day, I feel confident that I can leave the final one until (early) April...

Still not received the bonus funds on (that) Feb 1st subscription however - they're cutting it close as possible "within" the 14 days it seems....


I have seen some people have used their LISAs for house purchases by now; and from what I've seen/read the LISA can be used for either the deposit or upon completion (is that the correct terms for the 2 different stages where the mass lump sums of £££ are required...?) and is that accurate to say (that it can be used on either...?) anyone have 'real-World' experience of the former & latter ?

Cheers

eskbanker

NevvyC wrote: »

Still not received the bonus funds on (that) Feb 1st subscription however - they're cutting it close as possible "within" the 14 days it seems....

Just to expand on earlier posts above, the LISA bonuses are oriented around claim periods that run from the 6th of one month to the 5th of the following month, after which LISA providers have 14 days within which to submit claims to the government. The government agency then has another 14 days within which to pay up, which is effectively the 14 days from the 20th of each month that Skipton refers to, but obviously by this stage it's not within Skipton's control as to when the bonus is added. As you've highlighted above, the 14 day period runs up to Wednesday so it should be paid by then.

NevvyC wrote: »

I have seen some people have used their LISAs for house purchases by now; and from what I've seen/read the LISA can be used for either the deposit or upon completion (is that the correct terms for the 2 different stages where the mass lump sums of £££ are required...?) and is that accurate to say (that it can be used on either...?)

There isn't necessarily a 'correct' term as such but MSE chooses to refer to 'exchange deposit' and 'mortgage deposit' at https://www.moneysavingexpert.com/savings/help-to-buy-ISA/#exchange. However, a key difference between HTB ISA and LISA is that LISA can be used for either of these, so yes, you can access your LISA money up to 90 days before completion (as long as you've had the account open for 12 months at that point).

System

Thanks for clarifying. Which is required first?

(Guessing the mortgage deposit - as you need a mortgage in-place (or in primciple?) for exchange/completion, ergo; exchange deposit ...?)

Thanks again!

eskbanker

NevvyC wrote: »

Thanks for clarifying. Which is required first?

(Guessing the mortgage deposit - as you need a mortgage in-place (or in primciple?) for exchange/completion, ergo; exchange deposit ...?)

Thanks again!

The exchange deposit is required first, as exchange usually precedes completion, but yes, you need to have a joined-up plan at that stage to ensure that you're able to finish what you start!

Worth reading the 'buying a home timeline' article linked from that HTB piece, for more detail on the chronology of buying....

System

Right-oh, thanks! Yes I'd just gone to it straight after posting...

Just trying to get things clear in my head and it's difficult to tell where the money is going sometimes!

Seems process/timeline is:

Offer/acceptance -> exchange contracts (*deposit goes to seller) -> mortgage taken out (where do the mortgage lenders see a *deposit from if the deposit is going to the seller though?)


*LISA can be used at either stage, but HTB only on latter ?

eskbanker

NevvyC wrote: »

(where do the mortgage lenders see a *deposit from if the deposit is going to the seller though?)

You need to provide full details of the purchase to the mortgage lender, and in particular the valuation of the property (as this is their collateral for lending you the money) and the actual purchase price. They need to work out how much they're prepared to offer you as a mortgage, not just in absolute £ terms but as a percentage of the property value, so if you have, say, a 90% LTV (loan to value) mortgage, they know you're getting the 10% from somewhere else (the source of which you'll also be expected to declare), even though that money doesn't actually go to them as such.

NevvyC wrote: »

*LISA can be used at either stage, but HTB only on latter ?

Yes.

System

Right-oh, thanks. So the mortgage deposit isn't a deposit as such, more of the siggy on the dotted line when the LTV has been calculated and mortgage interest rate etc. ? And the seller is the one whom will receive the LISA funds... (Via solicitors obviously) or if this is above 10% the remainder goes towards reducing the mortgage rate ?

eskbanker

NevvyC wrote: »

Right-oh, thanks. So the mortgage deposit isn't a deposit as such, more of the siggy on the dotted line when the LTV has been calculated and mortgage interest rate etc. ? And the seller is the one whom will receive the LISA funds... (Via solicitors obviously) or if this is above 10% the remainder goes towards reducing the mortgage rate ?

The ambiguity of the word 'deposit' was one of the reasons that MSE explanation of 'exchange deposit' versus 'mortgage deposit' was published, but if you're using 'deposit' in the sense of 'advance downpayment paid to secure a deal' then the mortgage deposit doesn't fit this description, no.

And yes, if LISA money plus provisional mortgage exceeds the purchase price, it would be more normal to reduce the size of the mortgage, rather than either leaving money in the LISA or withdrawing the surplus while paying a penalty....

Tob3z

Hi,

Quick question. I just just come into some inheritance. I currently have a HTB ISA.

Can I open and transfer what I currently have in my HTB into a LISA, put in 4k in march, then put another 4k in April for the 19/20 FY?

eskbanker

Tob3z wrote: »

I just just come into some inheritance. I currently have a HTB ISA.

Can I open and transfer what I currently have in my HTB into a LISA, put in 4k in march, then put another 4k in April for the 19/20 FY?

You can put a maximum of £4K into a LISA before the end of this tax year on 5 April 2019, including what you transfer from your HTB.

In the first year of LISAs (2017/18), there was an exemption that allowed prior year HTB ISA money to be transferred over in addition to the £4K of annual LISA contributions, but that no longer applies.

If you have more than £4K in your HTB, it would need to be moved to the LISA across multiple tax years.