Lifetime ISAs guide

Aston83

Hi all.

Sorry if it has been mentioned in the previous 107 pages but I couldn't find it, however my concern is that the phrase 'exchange deposit' is thrown around. Does this mean there are two deposits I need? What can the LISA be used for?

Sorry if that sounds dumb but I'm a first time buyer going into this with a few unknowns.

eskbanker

Aston83 wrote: »

Sorry if it has been mentioned in the previous 107 pages but I couldn't find it, however my concern is that the phrase 'exchange deposit' is thrown around. Does this mean there are two deposits I need? What can the LISA be used for?

Sorry if that sounds dumb but I'm a first time buyer going into this with a few unknowns.

The ambiguous term 'deposit' is sometimes used for the downpayment made at the time of exchanging contracts, but also for the more generic total difference between mortgage and property price (paid on completion).

This distinction is important with Help To Buy ISAs, where the 25% bonus can only be applied to the latter, whereas LISA can be used for either or both, so if you'll be using a LISA then it's not really an issue.

MSE chooses to refer to these as 'exchange deposit' and 'mortgage deposit' to try to clarify, explained in more detail at https://www.moneysavingexpert.com/savings/help-to-buy-ISA/#accordion-content-1972634677-9

Theego22

I have a Newcastle Building Society Lisa with 1.1% APR. I see that moneybox has an offer with 1.4% variable. Is it better for me to transfer my LISA to get the better interest rate or is there a realistic risk the variable rate could drop lower than what I'm currently getting in the short term?

eskbanker

Theego22 wrote: »

I have a Newcastle Building Society Lisa with 1.1% APR. I see that moneybox has an offer with 1.4% variable. Is it better for me to transfer my LISA to get the better interest rate or is there a realistic risk the variable rate could drop lower than what I'm currently getting in the short term?

The Newcastle account isn't fixed and is variable too, as per their summary box at https://www.newcastle.co.uk/savings/cash-isas/newcastle-cash-lifetime-isa/, so it's not a fixed v variable comparison and there's the risk that they could choose to lower it.

Interest rate Annually 1.10 %Gross*/ 1.10% AER** (Variable)

Nobody knows what either provider will do with their interest rates in the future so it's really up to you whether or not you wish to chase best rates, but transferring is a straightforward process (albeit not all products allow inbound transfers - these both do though).

KMK

I am thinking of paying into a Lisa on behalf of my son aged 37.He is unable to afford the full £4000 contribution but I can afford to do so.He is not a high earner but does own his house outright thanks to help from us. The Lisa would boost his pension at age 60 onwards.He is already in his firm's scheme.

So I am drawn to the AJ Bell adventurous S&S Lisa.If I help to set it up with him can I pay the annual contribution or will it have to be channelled through his account?Also can it be paid annually by credit card or must it go through a bank account?

I would welcome any advice from anyone who has experience of this scheme before going any further.

masonic

KMK wrote: »

I am thinking of paying into a Lisa on behalf of my son aged 37.He is unable to afford the full £4000 contribution but I can afford to do so.He is not a high earner but does own his house outright thanks to help from us. The Lisa would boost his pension at age 60 onwards.He is already in his firm's scheme.

So I am drawn to the AJ Bell adventurous S&S Lisa.If I help to set it up with him can I pay the annual contribution or will it have to be channelled through his account?Also can it be paid annually by credit card or must it go through a bank account?

I would welcome any advice from anyone who has experience of this scheme before going any further.

Only he is allowed to pay money into an ISA in his name, so you should gift him the money and he can then pay it in himself. The account can be funded using a debit card, but not a credit card.

KMK

Thank you for this useful info.

Aston83

Cheers for your answer on the 'deposit' ambiguity. MARTIN lewis says Lifetime ISA is no brainer so the wife and I have opened one each.

Regarding deposits though, can you deposit the whole £4k in one hit to maximise interest on the bonus for the year or have to pay the max £333.33 monthly? We are in a good position to and my plan is to fill both our LISA's with the max amount then any extra overr 8k goes into a regular savings account to top up.

This sound correct?

dmmc

Hi, I've currently for a help to buy ISA and am investigating transferring it into a LISA, but am not sure whether it is worth it as I have a good sum in my help to buy ISA. The main advantage of switching would be to raise the house price cap from £250k to £450k, and to be able to save more in the ISA per year. It seems I should definitely have done this sooner.

My help to buy ISA currently has around £9700 in it; can I initially transfer all £9700 in to a new LISA and benefit from the 25% bonus within the LISA? Or I am limited to the £4000 per year?

If I am limited to seems to me that I will be better continuing saving in the help to buy ISA, as I aim to buy a house within the next 2 years.

eskbanker

Aston83 wrote: »

Regarding deposits though, can you deposit the whole £4k in one hit to maximise interest on the bonus for the year or have to pay the max £333.33 monthly? We are in a good position to and my plan is to fill both our LISA's with the max amount then any extra overr 8k goes into a regular savings account to top up.

This sound correct?

Yes, the LISA contribution limit is an annual one (unlike the HTB ISA's monthly cap), so you can pay £4K in in one go. This also means that if you have sufficient funds, you can pay in £4K between now and the end of the tax year in April 2020 and then another £4K immediately the new one starts.

Alternatively, you may find better interest elsewhere and choose to pay into the LISAs only at the end of each tax year....