How does interest payout on LISA's work?

dude7691

Hi There,
I have a pretty simple question but couldn't find an answer anywhere on my LISA's website. The interest (1.1%) on my Newcastle Cash LISA is paid annually. I opened the LISA in March of 2020 and will be looking to purchase a house in around October of 2023. I'm just wondering if because you are withdrawing the money to buy a house in the middle of the year, would you still get the interest (7 months worth in this case) when you come to withdraw the money, or will it only ever be paid on the anniversary of the account opening, meaning you forfeit 7 months worth of interest? Thank you  

kuratowski

You'll be paid any interest accrued since the last anniversary.

PS. When using a LISA to buy a house, you don't withdraw the money yourself.  Your solicitor will approach the bank/building society directly.

badger09

dude7691 said:

Hi There,
I have a pretty simple question but couldn't find an answer anywhere on my LISA's website. The interest (1.1%) on my Newcastle Cash LISA is paid annually. I opened the LISA in March of 2020 and will be looking to purchase a house in around October of 2023. I'm just wondering if because you are withdrawing the money to buy a house in the middle of the year, would you still get the interest (7 months worth in this case) when you come to withdraw the money, or will it only ever be paid on the anniversary of the account opening, meaning you forfeit 7 months worth of interest? Thank you  

Interest is calculated daily but only credited annually, so you'll get the correct amount (pro rata annual amount)  when the LISA is closed.

bowlhead99

The interest will be paid whenever the T&C say it will be paid, but if you close an account you won't 'lose' any interest that's been accruing daily even if it has not been applied to the account. If you closed the account to buy the house in the middle of the year, then as part of the closing process they would pay all the interest that they'd been accruing up to that point (say, seven month's worth since the last time they paid interest) because they can't wait and give it you later on the normal annual date because the account won't exist. 

However, if you make a withdrawal of most of the money and leave the account open, the interest would just be added to the account on the normal annual date. Some people when buying a house would keep the account open (e.g., because perhaps by that point they are over  the age of 40 and if they close the LISA they can't open another one, and having a LISA might come in handy for retirement planning). Whereas other people under 40 might just close out the account entirely when they buy their house, get all the funds (including accrued interest) paid to them to help buy the property, and then perhaps go and open another account later to buy investments for their retirement.

Alexland

bowlhead99 said:

if you make a withdrawal of most of the money 

"if you instruct your solicitor to make a withdrawal of most of the money" as people must remember not to withdraw themselves or they will pay a penalty greater than the bonus.