Does this make sense? Re H2B ISA and LISA for first time buying

BigBoss

My partner and I are saving for a house, and we currently have all of our money in H2BISAs. However, because of the low limit of H2B mortgages, we're planning on moving them to LISAs - either side of the April 5th cut off date (in order to get the bonuses for this year and next). I'm aware of MSE's advice about if you have over £5600 in your H2B then you may not benefit, but I feel it's irrelevant because we plan on buying a house over 250k.

This is the sensible strategy isn't it?

eskbanker

If you're planning to buy a house (outside London) valued above £250K then yes, you can't use HTB ISAs for that.

As to whether moving to LISAs is sensible, it's likely to be if you'll be buying in over a year (assuming you haven't opened them yet), and for no more than £450K, and that you're happy to commit to using the money towards this purchase (otherwise you'd face withdrawal penalties or leaving it until you're 60).  Do you have less than £8K in each HTB ISA?

masonic

Do you already have a LISA each open with a minimum balance, so that the clock is already ticking on the 1 year holding period? If not, I wouldn't delay doing so until March/April.

BigBoss

eskbanker said:

If you're planning to buy a house (outside London) valued above £250K then yes, you can't use HTB ISAs for that.

As to whether moving to LISAs is sensible, it's likely to be if you'll be buying in over a year (assuming you haven't opened them yet), and for no more than £450K, and that you're happy to commit to using the money towards this purchase (otherwise you'd face withdrawal penalties or leaving it until you're 60).  Do you have less than £8K in each HTB ISA?

Both open - mine recently, partner's before, but yes buying in over a year (prob 18 months).

What happens if the house is more than 450k? Can we put the LISA money towards? 

Yes we have less than 8k in both (just under in one).

eskbanker

BigBoss said:

What happens if the house is more than 450k? Can we put the LISA money towards?

Only by paying the 25% withdrawal penalty....