Help to buy ISA Fact or Fiction

Pink_Gin_2

Hello,

Im looking for a second opinion and perhaps end-user experience if possible.

I have a savings and investments ISA in year 2 which is breaking even - i wasn't originally saving for property but my plans have changed due to unforseen circumstances.

I have recently been advised that switching some funds (200£ a month plus 800 in the first month) to a Lifetime ISA or Help to buy ISA would be a wrong move due to the following:

HTB ISAs are a bad option because the “bonus” cannot be used as a part of the house deposit. That is because it is often paid out several months afterwards.

The Lifetime ISA may be cancelled soon.

I'd gain more with my current ISA as it stands at a projected 8% yearly interest (on 600£ a month).

If i got 8% i'd be made up!

So is splitting my investment a bad idea and is the HTB ISA total rubbish??

Opinions appreciated.

bowlhead99

Pink_Gin wrote: »

Hello,

Im looking for a second opinion and perhaps end-user experience if possible.

I have a savings and investments ISA in year 2 which is breaking even - i wasn't originally saving for property but my plans have changed due to unforseen circumstances.

So are you now saving for a property at some point or not? Later you are talking about house deposit. So presumably you do intend to buy a property at some point

I have recently been advised that switching some funds (200£ a month plus 800 in the first month) to a Lifetime ISA or Help to buy ISA would be a wrong move due to the following:

HTB ISAs are a bad option because the “bonus” cannot be used as a part of the house deposit. That is because it is often paid out several months afterwards.

You can't use the bonus at the initial exchange of contracts but can use it as completion monies, meaning you can get a smaller mortgage because of the free money from the government. The vast majority of purchases will complete well within the period you would be time barred from claiming the HTB bonus after closing the account.

It's not as useful as the Lifetime ISA (because you can't put at as much per year, can't get the same total level of bonus towards a house, have more restrictions on the value of property you're allowed to buy; can't use it at all stages of purchase) but for a property buyer it's still way better than a normal, non-, bonus ISA. What's not to like about free money!

The Lifetime ISA may be cancelled soon.

This is just BS speculation.

If you listen to the sceptics, don't invest money anywhere because there will be a crash, don't use any government tax advantaged products like LiSA or pension or ISA because government will change the rules, don't trust the banks' savings accounts because the government will confiscate your money if they are short on tax income etc etc.

You can ignore most of this claptrap. However if you were concerned it was going to get withdrawn in due course and you wanted it, that would make plenty of sense to grab the £4k per year allowance now while you can, even if they stop making it available in future years you'll get the current year bonus.

I'd gain more with my current ISA as it stands at a projected 8% yearly interest (on 600£ a month).

This suggests you misunderstand the nature of investments. If you are using S&S investment ISAs - you might well have got 8% last year but there should be no expectation that you'll get 8% next year, as it depends on the markets. If someone is 'projecting' 8% for the next year, be cautious as it is either misleading or a scam. Whereas if they, or you, say it has given 8% returns historically - that's not at all abnormal.

So is splitting my investment a bad idea

What is the goal? Buying a property or retirement or something in between?

As a general rule, if you are going to buy a property,
a) use cash rather than investments if its in the next 5-8 years or so
b) use HTB ISA or LISA products to maximise the free money from the government
c) LISA usually beats HTB if you can qualify for it, due to having a higher max annual contribution leading to larger bonus.

is the HTB ISA total rubbish??

No, it's great, but not as good as LiSA if you can qualify for the Lisa and are definitely going to be buying a property at some point.

Pink_Gin_2

Thanks for the quick response.

Im looking to buy in the future and see either ISA as free money - just wondering if there are opinions out there in line with what i was told.

Im questioning the advice because i dont think my current ISA, based on historical performance, is going far enough. 'Projection' was a direct quote.