Should I transfer H2B funds into a LISA?

Bacardi84uk

I have just over £4k in a Help to Buy ISA but am not sure when I'll be buying a house, or even if I'll be eligible for a bonus when I do, as I may be buying joint with my partner who already owns a property.  In people's opinion what is my best option? Open a LISA and transfer the £4k over to it before April?  Keep putting money into the H2B ISA but also open a LISA and put in whatever spare cash I have above the H2B maximum monthly deposit? Keep the H2B ISA and forget about the LISA altogether? Or mystery option Number 4?  

Suggestions welcome.  FYI not sure if it factors into things but I'm 35y old.

Cheers.

eskbanker

Buying jointly with a partner who already owns isn't a differentiator between LISA and HTB as it's equally possible with both - assuming you don't have a legal interest in partner's property (e.g. via marriage) then you can use either of these as a first time buyer.

LISA can only be used (penalty-free) once held for a year so if you're buying sooner than that then this will steer you to HTB. 

Otherwise the higher bonus-earning capacity of LISA would likely make this a better bet than HTB if you have more than £200pm to contribute as suggested, with the higher property value cap also a plus.

It's not really practical to keep hedging your bets indefinitely though, so worth making a decision about which you'll use, pile as much as you can into it and sticking with it thereafter.

Bacardi84uk

Thanks for the reply.  The first paragraph is a revelation - so you're saying as long as I have no claim to her property and we're not married, if we buy a new place together I am still considered a first time buyer and can still claim a H2B or LISA bonus for the purchase?  In which case, pending your confirmation and as it'll be at least a year before we look to buy, I'll open a LISA to get the clock ticking.  I only opted for the H2B ISA as I knew the deadline was approaching. With the LISA, withdrawal is only available after a calendar year then? But the £4k max deposit is per tax year yes? And if for example I deposit the full £4k this week I should expect to get the £1k bonus sometime in April?   Sounds like a LISA is the way to go.  Do you have to use the full balance of a LISA when buying or can you use only part? And if you do use all or some of the LISA balance, can you keep paying into it after the purchase or does it get closed down?

Thanks again.

eskbanker

Bacardi84uk said:

The first paragraph is a revelation - so you're saying as long as I have no claim to her property and we're not married, if we buy a new place together I am still considered a first time buyer and can still claim a H2B or LISA bonus for the purchase?

Yes, if you haven't owned a stake in a property before.

With the LISA, withdrawal is only available after a calendar year then?

Yes, you pay a 25% withdrawal penalty if accessing any of the money within the first 12 months.

But the £4k max deposit is per tax year yes?

Yes.

And if for example I deposit the full £4k this week I should expect to get the £1k bonus sometime in April?

If the £4K is paid in this week then the bonus should be paid in late March or early April.

Do you have to use the full balance of a LISA when buying or can you use only part?

You need to plan carefully here - you don't have to use the full balance but anything you don't use towards the purchase would be subject to a withdrawal penalty if you wanted to access it before 60.

And if you do use all or some of the LISA balance, can you keep paying into it after the purchase or does it get closed down?

You can keep it open but only do so for money you're happy to tie up until 60.

Bacardi84uk

Great, thank you.  I'm happy topping up the LISA until I'm 60.  It'd be nice to have an extra little nest egg for retirement.  

eskbanker

Bacardi84uk said:

I'm happy topping up the LISA until I'm 60.  

Just to be clear, you can top it up until you reach 50 but can access it from 60, i.e. they're two separate milestones....