We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

ISA vs L-ISA

Hi everyone,

I'm 21 years old, living with parents, and I'm not looking to move out within the next 3/4+ years. I have over £30k saved and I'm looking to find out which ISA is best for me.

I've already got a Help-To-Buy ISA (with Barclays) which has been open for approx 1.5 years (over £4k saved in the account) which I'm putting the maximum of £200 a month into. I'm also looking at opening a Life-ISA with Moneybox, which I'll put £4,000 into as well (which is the maximum for each tax year). I'm aware you can have both ISA's open at the same time, but I've found the government will only help you with either the L-ISA or the Help-To-Buy ISA to buy a new house, for up to £450k for first time buyers (me).

I don't know if what route I should take? Most of my money is in NS&I Premium Bonds. Can anyone suggest what ISA to put my money into, or if there's an advantage of putting money into both of them?

Thanks!

Comments

  • mcooke999
    mcooke999 Posts: 196 Forumite
    Seventh Anniversary 100 Posts Name Dropper Photogenic
    If you're certain that one day you will be using the money to buy your first home then definately a LISA. You'll get up to an extra £1k/yr for every £4k/yr you put into one. So free money basically. If it's for a house in the near/mid term then you should be looking at a cash LISA rather than investing it in a S&S LISA. Only invest money in a S&S LISA or ISA that you don't need for the next 10+ years, so more for retirment savings really or longer term goals.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Post of the Month
    edited 19 June 2020 at 11:26AM
    You are right that you are allowed to save into both products if you qualify (by age and by having not being a property owner already), but the government only lets you use the bonus from one of them towards the property purchase.

    As the L-ISA will let you add £4k each and every tax year and the HTB-ISA is only £2.4k per tax year (and in monthly chunks, so that if you were buying a property in May one year you'd only have been able to get £400 into an HTBISA that tax year while the LISA could have taken all £4k in early April),  the L-ISA is the route that would get you the largest total amount put away by the time you are ready to buy the property, and thus the highest possible bonus towards the property.

    It's also more useful because the HTB is capped at £12k as the maximum total contribution that will attract a bonus, and only lets you get a property up to £250k value if it's outside London.

    The minor downside with a LISA is that once the money goes into it, you can't take it out without a penalty (other than to put towards your property or once you reach age 60+) so if you were wavering about whether you would ever actually get round to being a first time buyer of a qualifying property, you might choose to just stick with the HTB-ISA where you can get your money back instantly without penalty.  Most in your situation with decent savings and an eventual expectation that they would buy somewhere some years in the future, would try to max out the LISA.

     As the nature of an HTB ISA savings account is that it will never have massive balances and it won't go up very fast, the banks and building societies don't mind paying better interest rates than they pay for other accounts. So after you've decided to add to the LISA, nothing to stop you still doing the HTB at the same time, because you can always get your money out of it later. In the meantime, no real harm in carrying on with the HTB account if the interest rate it pays is higher than the current ~1.2% expectation for premium bonds.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.