Advice on Transferring Help to Buy ISA to a Lifetime ISA

MoneyMan01

Hi Everyone

I currently have the following:

Nearly £11,000 in a Help to Buy ISA paying 1% interest.

I'm about 6 months away from getting the maximum "bonus" on that account.

I notice the Lifetime ISA actually allows a house purchase of up to £450k whilst the HTB is only £250k (outside of London).

My plan is to buy a house at some point, not in the next year, no idea when yet as I am 27 living with parents but still need to save quite a bit more to get a property in my area, could take years.

I was thinking of moving my HTB ISA over to a Lifetime ISA so I can opt for getting a property up to £450k (I would be looking for a property on the outskirts of London, not in London).

Having looked into this I notice you can only pay in £4k a year into a Lifetime ISA, so if I am understanding it correctly, that means I can only transfer £4k of my HTB ISA this tax year, then £4k next tax year, and then the remaining £4k the tax year after that.

My question is, would that make any sense doing that? All I can see that would do is make me wait 3 years to be at the stage I am now. However in the current state, it means I can only purchase a house under £250k outside of London to get the bonus?

I could open a Lifetime ISA now and put £4k in (additional funds, not from the HTB), but would that make any sense either? It would still take me 3 years to get to the same situation I am in now right?

Can anyone offer advice on what I should do?

eskbanker

To me the key questions are whether or not you'd be looking at a property over £250K or not, and when you'd be looking at buying.

If you're needing a scheme that applies over £250K (outside the defined London boroughs) then obviously that needs to be LISA so that would effectively make the decision for you.

Likewise, if you're unlikely to be buying before April 2023 then you'll be able to get more government bonus from LISA than HTB.

As recommended on your other thread, opening a LISA now with a token amount defers the decision until next March so would be a sensible first step if you're still unsure of your answers to the above - you can't keep your options open for ever but perhaps in eight months time your future direction may be clearer....

MoneyMan01

But in terms of whether I "Should" move that money over is what I finding difficult to decide on.

If say in a few years I am able to save even more money then the answer would 100% be that I would look to buy a property over £250k. (current "cheapest" house in my area is £275k), I could get a flat, but my plan is, whilst I can, is to save to purchase a house and save on all the costs knowing I would move on from that flat anyway.

Regarding moving my HTB over to the LISA, well that would mean, in 3 years, I am at the exact stage I am going to be at in 6 months time, when maxing out the HTB bonus (HTB will have £12k).

Does it make financial sense moving it over?

What other options do I have in me wanting to use the LISA as the property purchase bonus whilst I've already built up the max in the HTB?

grumiofoundation

But you aren’t in the ‘same’ position as you can now use the bonus to buy a £450k house not a 250k one. 

MoneyMan01

grumiofoundation said:

But you aren’t in the ‘same’ position as you can now use the bonus to buy a £450k house not a 250k one. 

I can't.

The HTB ISA only allows house prices up to £250k in my area. HTB is only £450k in London.

grumiofoundation

Meant ‘now’ as in once you have 12k in LISA (forgot your quote) - so in April 2022.

MoneyMan01

grumiofoundation said:

Meant ‘now’ as in once you have 12k in LISA (forgot your quote) - so in April 2022.

Oh I see what you mean.

But doing that would basically mean all I am doing is a transferral of funds that is taking 3 years.

Wanted to know what other options I have as it seems nonsensical doing that.

bowlhead99

TheDarkKnight93 said:

grumiofoundation said:

Meant ‘now’ as in once you have 12k in LISA (forgot your quote) - so in April 2022.

Oh I see what you mean.

But doing that would basically mean all I am doing is a transferral of funds that is taking 3 years.

Wanted to know what other options I have as it seems nonsensical doing that.

It's not nonsensical because there is sense behind it, and you will be moving to a better product with greater possible total bonus and more flexibility on what sort of property to buy.

If you put in the first £4k to the LISA by 5 April 2021, then by the next day (6 April 2021, new tax year) you can have £8k in the LISA and by 6 April 2022 (less than 2 years from now) you can have £12k in the LISA. Importantly, on 6 April 2023 (less than 33 months from now) you can add another £4k to make £16k, and by 6 April 2024 you can make it £20k, and so on - no upper limit, you are allowed the bonus on anything you put in, as long as you don't go over the contribution limit per year. The more bonus the better, right?

Whereas if you stay with the HTB ISA the maximum amount you can have a bonus on is £12k, and you may not even be able to use the bonus if you don't buy a relatively cheap property (due to going over £250k limit).

So, if you'll definitely buy at some point, but are unlikely to be buying before 6 April 2022 (the date by which you can top the LISA up to £12k) it is not 'nonsensical' to gradually transfer the money over into the better product.

In the meantime, HTB ISAs pay pretty good interest rates so there's no need to take all your money out of that product right now, but you can feel free to gradually wind it down over time as you move money into the LISA. 

MoneyMan01

bowlhead99 said:

TheDarkKnight93 said:

grumiofoundation said:

Meant ‘now’ as in once you have 12k in LISA (forgot your quote) - so in April 2022.

Oh I see what you mean.

But doing that would basically mean all I am doing is a transferral of funds that is taking 3 years.

Wanted to know what other options I have as it seems nonsensical doing that.

It's not nonsensical because there is sense behind it, and you will be moving to a better product with greater possible total bonus and more flexibility on what sort of property to buy.

If you put in the first £4k to the LISA by 5 April 2021, then by the next day (6 April 2021, new tax year) you can have £8k in the LISA and by 6 April 2022 (less than 2 years from now) you can have £12k in the LISA. Importantly, on 6 April 2023 (less than 33 months from now) you can add another £4k to make £16k, and by 6 April 2024 you can make it £20k, and so on - no upper limit, you are allowed the bonus on anything you put in, as long as you don't go over the contribution limit per year. The more bonus the better, right?

Whereas if you stay with the HTB ISA the maximum amount you can have a bonus on is £12k, and you may not even be able to use the bonus if you don't buy a relatively cheap property (due to going over £250k limit).

So, if you'll definitely buy at some point, but are unlikely to be buying before 6 April 2022 (the date by which you can top the LISA up to £12k) it is not 'nonsensical' to gradually transfer the money over into the better product.

In the meantime, HTB ISAs pay pretty good interest rates so there's no need to take all your money out of that product right now, but you can feel free to gradually wind it down over time as you move money into the LISA. 

I guess. I can definitely see what you are saying, and that does make sense.

Just annoying it wasn't made aware by the actual HTB at the time of release of the LISA so I could of been moving it over then and got to the stage I am now, sooner.

grumiofoundation

TheDarkKnight93 said:

bowlhead99 said:

TheDarkKnight93 said:

grumiofoundation said:

Meant ‘now’ as in once you have 12k in LISA (forgot your quote) - so in April 2022.

Oh I see what you mean.

But doing that would basically mean all I am doing is a transferral of funds that is taking 3 years.

Wanted to know what other options I have as it seems nonsensical doing that.

It's not nonsensical because there is sense behind it, and you will be moving to a better product with greater possible total bonus and more flexibility on what sort of property to buy.

If you put in the first £4k to the LISA by 5 April 2021, then by the next day (6 April 2021, new tax year) you can have £8k in the LISA and by 6 April 2022 (less than 2 years from now) you can have £12k in the LISA. Importantly, on 6 April 2023 (less than 33 months from now) you can add another £4k to make £16k, and by 6 April 2024 you can make it £20k, and so on - no upper limit, you are allowed the bonus on anything you put in, as long as you don't go over the contribution limit per year. The more bonus the better, right?

Whereas if you stay with the HTB ISA the maximum amount you can have a bonus on is £12k, and you may not even be able to use the bonus if you don't buy a relatively cheap property (due to going over £250k limit).

So, if you'll definitely buy at some point, but are unlikely to be buying before 6 April 2022 (the date by which you can top the LISA up to £12k) it is not 'nonsensical' to gradually transfer the money over into the better product.

In the meantime, HTB ISAs pay pretty good interest rates so there's no need to take all your money out of that product right now, but you can feel free to gradually wind it down over time as you move money into the LISA. 

I guess. I can definitely see what you are saying, and that does make sense.

Just annoying it wasn't made aware by the actual HTB at the time of release of the LISA so I could of been moving it over then and got to the stage I am now, sooner.

What do you mean made aware?

The differences in the schemes were clearly laid out from the start. In fact when the LISA was first brought out you were able to transfer your whole HTB ISA (even if more than £4000) to LISA until a cut off point (can't remember when). 

MoneyMan01

grumiofoundation said:

What do you mean made aware?

The differences in the schemes were clearly laid out from the start. In fact when the LISA was first brought out you were able to transfer your whole HTB ISA (even if more than £4000) to LISA until a cut off point (can't remember when). 

See I wasn't aware of that.

It didn't seem like it was marketed to the mass audience that you could trasfer all of it, otherwise I would of done at the time.