Help to Buy ISA vs Lifetime ISA - please help!

hannahely

Hello,

I opened my Help to Buy ISA in December 2015. I'm about to reach the maximum but I am not quite ready to buy a house yet. Having watched my brother buy his first home at the end of last year - I can't help but feel the Help to Buy is a bit of a con. He bought just outside of London (so still London prices) but he couldn't use Help to Buy as the property was over £250,000. Not being able to use the money as an exchange deposit is very frustrating also.

I am considering switching to the Lifetime ISA, having to pay in lump sums from my Help to Buy over the next couple of years. It seems appealing as you get the bonus monthly and you can use it as an exchange deposit. I had opened a Lifetime ISA with moneybox about 6 months ago just in case - so the time limit is not a problem for me.

Any advice on what scheme is fundamentally better?? Can Moneybox be trusted? I don't like that no high street banks offer a LISA.

Any advice would be greatly appreciated - sincerely a confused 24 year old

Alexland

hannahely said:

Having watched my brother buy his first home at the end of last year - I can't help but feel the Help to Buy is a bit of a con. He bought just outside of London (so still London prices) but he couldn't use Help to Buy as the property was over £250,000. Not being able to use the money as an exchange deposit is very frustrating also.

Just because the government defined HTB ISA rules were not suitable for your brother's circumstances doesn't make it a con as these rules were clear from when he opened the account and have not changed.

Any advice on what scheme is fundamentally better??

In financial services it's about suitability for your circumstances not which products are fundamentally better. Advantages of the HTB ISA include that it usually offers a better interest rate and has no withdrawal penalty. Advantages of the LISA include that it has a bigger annual contribution limit and can be used on a more valuable property outside of London. If you are likely to buy a property worth over £250k outside London then the HTB ISA is clearly not suitable for your purpose however you might as well keep it going for the improved interest rate.

hannahely said:

Can Moneybox be trusted?

Moneybox wouldn't be my choice of Cash LISA provider due to their complex cash collection processes and unusual end of tax year contribution arrangements. However if you follow their processes and make your contribution in good time then they can be trusted to run the LISA account and it will be FSCS protected for balances of up to £85k.

Albermarle

I don't like that no high street banks offer a LISA.

If you read this forum regularly then you would see that most regular contributors actively avoid high st banks when possible.

Away from current accounts and regular savings they ted to offer poor value products,

jimmydangerous

I have £10,718 in Help to Buy ISA (as at end of 2019-2020 Tax Year) and have recently moved to outskirts of London (Hertfordshire) which means houses are not going to be less than £250k so my Help To Buy Govt Bonus is now not useable.
Can I transfer my full Help To Buy Savings to a LISA OR am I limited to the £4k max pay in..? Me and my partner are considering buying a house within the next year which makes going for a LISA a bit sketchy...
Thanks

eskbanker

jamesharveyham said:

Can I transfer my full Help To Buy Savings to a LISA OR am I limited to the £4k max pay in..?

You can't put more than £4K into a LISA in any tax year, regardless of whether it's new money or a transfer from a non-Lifetime ISA.

jimmydangerous

@eskbanker
Ok new scenario:
I leave my £10+K in H2B (better interest rate) than the joint Cash ISA I have.
From another account, I transfer £4K into LISA this month, if I decide to buy a house within 12months can I get the money out at the lowered 20% penalty fee that the Govt has just changed it to..?

eskbanker

jamesharveyham said:

From another account, I transfer £4K into LISA this month, if I decide to buy a house within 12months can I get the money out at the lowered 20% penalty fee that the Govt has just changed it to..?

If you make a chargeable withdrawal from a LISA before 6 April 2021 then yes, the reduced 20% penalty applies, which basically means that you get back what you paid in.

jamesharveyham said:

the joint Cash ISA I have

There is no such thing as a joint ISA, the I stands for Indvidual.

Tony_Pezz

My daughter and her boyfriend took out a Help To Buy ISA with Moneybox in Nov 2019. They had no date in mind to buy a property. However, my daughter has found out she is pregnant and they have found a help to buy shared ownership property. They need the funds for their deposit etc. Moneybox say they have to leave the money in the account for 12 months or lose the 25% government contribution PLUS pay a penalty of £6.25 for every £100 they have saved. Is there any way these penalties can be waived?

Alexland

Tony_Pezz said:

Moneybox say they have to leave the money in the account for 12 months or lose the 25% government contribution PLUS pay a penalty of £6.25 for every £100 they have saved. Is there any way these penalties can be waived?

Yes with Moneybox it would have been a LISA not a HTB ISA and the government just gave a holiday on the £6.25 penalty.

https://www.moneysavingexpert.com/news/2020/05/lifetime-isa-withdrawal-penalty-reduced-due-to-coronavirus/

Tony_Pezz

Thanks. After I posted my question I realised that they have a LISA not HTB. HMRC has dropped the 25% penalty to 20% until July 2021. It is still a £2,000 loss

grumiofoundation

Tony_Pezz said:

Thanks. After I posted my question I realised that they have a LISA not HTB. HMRC has dropped the 25% penalty to 20% until July 2021. It is still a £2,000 loss

But they are only losing the bonus? So getting back what paid in - not a loss at all?