Best saving combination with help to buy ISA

Legacy_user

Hi everyone,

New to the forums and money in general haha,
Me and my other half have been talking about saving for a mortgage for years now and since I have been in university until last year, I am only recently able to start saving towards it...

My girlfriend has been saving for a while and has a help to buy ISA with Barclays, I plan on doing the same next month but I also want to save more than the £200 limit for the ISA... What is the best option for this as I'm finding it all a little confusing...

Is a lifetime ISA an option or would I be best sticking to a normal bank savings account? I will be using both of them for the mortgage in the end so I don't know if that changes anything?

Thanks in advance and sorry if I seem a little bit daft, I have always found this kind of stuff a bit confusing :embarasse

20SmthngSver

Lifetime ISA is a good option. If you deposit £4k per tax year, as and when, HMRC will add £1k. Effectively, whatever you add per tax year, will get a 25% bonus. No other account will offer that much.

System

Ahh thank you! That's sort of what I was hoping for but I wasn't sure if I would be able to pool the money from my Help to buy ISA and my lifetime ISA at the same time

20SmthngSver

You can transfer in what you've saved into your Help to Buy ISA already, but anything up to the £4k LISA limit will use up your allowance for the LISA this tax year. You can both have a HTB and LISA at the same time, so one each of each account. So, say your partner has £1k in a HTB now, that can be transferred in and you've still got £3k of allowance left for the 2019/20 tax year that you can deposit in drabs or a lump anytime before the end of the tax year.

You can only claim the bonus for a house from one or the other though. You can't use the total of your Lifetime ISAs as well as claiming the Help to Buy Bonus.

I use a Help to Buy ISA, for three years now, purely for the interest as I live in a an area where nothing is under £250k. I also save into a Lifetime ISA, as the house price limit is much higher (£450k) and each tax year my £4k deposit gets £1k added to it. I'm lucky that my Help to Buy ISA still pays 4.25% though. Look at the bonus as interest, where else will you find an account which pays 25% on your deposits up to £4k?

System

Ahh I see! So even if I'm only getting the bonus from one of the ISAs it's still better to save in both than a savings account with a bank?

I am hoping to be saving about £800 a month (£200 of which being straight into the HTB ISA) and wasn't sure if the interest would outweigh any potential bonus from the LISA

wjr4

Has your bank account got a linked high-interest regular saver (e.g. First Direct)?

System

I don't believe so, I literally only have a student current account with Santander, I have never had any savings accounts or any other bank account since I was around 14... I have never really needed anything else until now, so I'm trying to find out as much as I can now before I continue in the next few weeks

20SmthngSver

DylanJaimz wrote: »

Ahh I see! So even if I'm only getting the bonus from one of the ISAs it's still better to save in both than a savings account with a bank?

I am hoping to be saving about £800 a month (£200 of which being straight into the HTB ISA) and wasn't sure if the interest would outweigh any potential bonus from the LISA

Well it's up to you really, how much you can save and your circumstances and accessibility. HTB ISA you can claim a bonus on a balance up £1600 for a house under £250k if you live somewhere with those prices. LISA can be used up to £450k.

Who's your current account with? Can get 5% on some linked regular savers. You've got £600 after your monthly HTB £200, so you could easily pay in to an LISA (works out about £334 a month, but a LISA you can lump in money as often as you like, for varying amounts monhtly, or whenever, as long as the balance per tax year doesn't expect a contribution of £4k). You could easily fund a HTB ISA, LISA and two regular savers.

A LISA is for a pension withdrawalable post 60, or for a mortage/house dpeosit before then. It's not an instant access account (unless you die lol).

System

Sorry for the late reply!

My current account is with Santander and to be honest we have come to agree that the houses we are looking for will be £250K maximum anyway as to keep it affordable for now... So if I saved the normal £200 a month in a HTB and also opened a LISA to put another £600 a month in I would still be able to use this for a deposit on a house? I was under the impression that you can't really use both at the same time (which is what I aim to be doing) so I thought a regular saver was my only other option really

Flobberchops

DylanJaimz wrote: »

Ahh I see! So even if I'm only getting the bonus from one of the ISAs it's still better to save in both than a savings account with a bank?

I am hoping to be saving about £800 a month (£200 of which being straight into the HTB ISA) and wasn't sure if the interest would outweigh any potential bonus from the LISA

Probably, yes. Many people use their HTB ISA account as an ersatz Regular Saver, and what's more one that doesn't expire after a year. I see you're with Barclays which has the market leading HTB currently at 2.58%, so keep paying the max into that unless you can find something significantly better.


You're right, you can only claim the gov bonus from HTB or LISA savings, and additionally I don't believe you can mix and match (you with a HTB and your partner with a LISA, for example). However, if you're saving £800 a month = £9600 a year, that's well in excess of the combined annual limits of £2400 into a HTB and £4000 into a LISA, so there's really no either/or choice. Pay the maximum into both. That's £200 a month HTB and £333 a month into the LISA, although in a cash LISA it makes sense to pay the full £4000 as late in the tax year as possible if it could be earning better interest elsewhere.


This leaves you with about £267 a month to save elsewhere. If you're taking a HTB ISA then a normal cash ISA is out, but you could consider something like a Halifax regular Saver paying 2% on up to £250 a month. Or, if you qualify, one of the interest paying current accounts (are the 5% ones still available?). Or, if the house purchase is a way off and you're willing to lock up a lump sum for several months to a year, check out the bond/notice account section. Metro, for example, is offering 2% on a 1 year deposit or 2.25% on 3 years.

Flobberchops

DylanJaimz wrote: »

My current account is with Santander and to be honest we have come to agree that the houses we are looking for will be £250K maximum anyway as to keep it affordable for now... So if I saved the normal £200 a month in a HTB and also opened a LISA to put another £600 a month in I would still be able to use this for a deposit on a house? I was under the impression that you can't really use both at the same time (which is what I aim to be doing) so I thought a regular saver was my only other option really

Perhaps I'm being thick but you haven't made it clear whether your savings budget is just for you, or also includes deposits to your partners savings, or are they saving independently?


The annual LISA limit is £4000 which means your plan to save £600 per month would have to come to a halt after about six months into each tax year. Unless you and your partner both have LISAs, in which case problem solved, split your savings between the two.



No, you can't claim the 25% gov bonus from a combination of HTB and LISA but you can hold both and benefit from the HTB's preferential interest rate while you're a first time buyer.