Lifetime ISAs guide

Steviestew20

Hey guys,

Myself and my wife both have HTB ISA’s which we were going to use for a deposit for a house in the next few months.

It’s suddenly dawned on me that the majority of houses we are looking at are above the £250k limit on a HTB ISA.

From what I gather you would only get the bonus on a LISA if it had been open for 12 months. Is this correct?

Is there any way around this which would mean we could still get the bonus without having to wait a full 12 months?


Any ideas gratefully received?

Thanks,
Stephen

masonic

Steviestew20 wrote: »

From what I gather you would only get the bonus on a LISA if it had been open for 12 months. Is this correct?

You'll get the bonus, but if you make a withdrawal within the first 12 months you will also pay a 25% penalty, equivalent to a loss of just over 6% of what you paid in overall.

Is there any way around this which would mean we could still get the bonus without having to wait a full 12 months?

Yes, there is a way around this, although most people would put it in the category of 'probably not worth it': the penalty would not apply if you become terminally ill with less than 12 months to live

A slightly less morbid option would be to put in a series of low-ball offers on the properties you are looking at and you never know, you might get lucky and snag one below the HTB ISA limit - this is very also very MSE

epm-84

Steviestew20 wrote: »

Hey guys,
Is there any way around this which would mean we could still get the bonus without having to wait a full 12 months?

The only option for an imminent house purchase with a Lifetime ISA bonus, without losing money, is using part of the money for the house purchase and part for retirement.

Say you have £12000, when transferring to a Lifetime ISA that'll increase to £15,000. If you withdraw £8000 early you'll get £6,000 after the penalty. You'll also have £7,000 remaining but that'll be locked away until you're aged 60 - unless you pay a further withdrawal penalty. If you did decide to do that then it would be best to move the remainder to a Stocks & Shares ISA, not an Easy Access ISA.

The other alternatives are cheaper houses, waiting or closing your Help2Buy ISA without claiming a bonus.

Alexland

epm-84 wrote: »

The only option for an imminent house purchase with a Lifetime ISA bonus, without losing money, is using part of the money for the house purchase and part for retirement.

Say you have £12000, when transferring to a Lifetime ISA that'll increase to £15,000. If you withdraw £8000 early you'll get £6,000 after the penalty. You'll also have £7,000 remaining but that'll be locked away until you're aged 60 - unless you pay a further withdrawal penalty. If you did decide to do that then it would be best to move the remainder to a Stocks & Shares ISA, not an Easy Access ISA.

The other alternatives are cheaper houses, waiting or closing your Help2Buy ISA without claiming a bonus.

This doesn't make sense. Steviestew20 doesn't yet have a LISA and the maximum they can transfer into a LISA from another ISA is £4k per tax year and they would pay a penalty bigger than the bonus for any money they used towards the purchase within the first 12 months. The option to move the whole HTB ISA balance was only in the first tax year after product launch. Even if you could transfer more why would you transfer the proportion you would pay an effective 6.25% penalty on using early?

rjmachin

Hi Everyone,

I am turning 39 later this month. I already own my own home (with a mortgage).

I'm not really in a position to put money in to a LISA for my pension at the moment. I have £78k left to pay on my mortgage, and I want to build up my savings to have 6 months salary in case the worst happens (approx £12k needed for that).

Approximately £400 combined pension contributions are being made each month at the moment.

Would it be advisable to open a LISA before my 40th birthday, to "get my foot in the door" before the door closes? With the expectation to be to start paying in to it as soon as I can do?

If so, would I need to make a nominal contribution to it each year to keep it active?

Zorillo

You could open a LISA with £1 to keep options open after you are 40, certainly.

masonic

There would be no need to make an annual contribution. Just open with the minimum balance as Zorillo says.

rjmachin

Thank you, I've opened a LISA with Moneybox and asked it to deposit an initial £1

ali576

apologies if this has already been answered but what would happen to your LISA if your husband/wife purchased a property in their own name. both being FTB.

can the LISA still be used in future for property purchase?

eskbanker

ali576 said:

apologies if this has already been answered but what would happen to your LISA if your husband/wife purchased a property in their own name. both being FTB.

can the LISA still be used in future for property purchase?

If you jointly buy a property with someone who has previously owned, you can use a LISA if you're still a FTB.