Lifetime vs Help to buy ISA

jake_jones99

Hi all,

A few years ago I got myself a help to buy ISA that I since diligently filled with £200 monthly to the £12,000 mark. It has been paying a ~2% interest which back when I started it was pretty good, now it's losing me money. I'm not ready to buy a house yet, so I am hesitant on what to do with that cash. I have an empty LISA which I can transfer the cash to, but the issue is I'll be limited to £4000 yearly (even if you transfer from another ISA, that is still the limit - i checked - the only advantage being that it doesn't decrease my overall ISA allowance). 

If I put it in a LISA, I have some money market funds that would give me a lot more than 2%. However it will take 3 years. If say I want to buy a house in a year, i will have 4000 in the Lisa and 8000 in help to buy and can only use the bonus in one. 

It feels a bit unfair that HTB ISAs have been abandoned on a low interest. Soon enough the government bonus will be less than what I lose from getting a low interest. 

Do any of you sharp savers have any advice on what would be best to do here? Thanks!

masonic

Unless you are 2.5 years+ away from being in a position to buy, or will not meet the rules of the HTB ISA scheme, you'd be better off taking the interest hit and collecting the 25% bonus from this ISA rather than building up your LISA.

There are a few options you could transfer to so as to improve the rate: https://www.moneysavingexpert.com/savings/help-to-buy-isa/#bestbuys

jake_jones99

masonic said:

Unless you are 2.5 years+ away from being in a position to buy, or will not meet the rules of the HTB ISA scheme, you'd be better off taking the interest hit and collecting the 25% bonus from this ISA rather than building up your LISA.

There are a few options you could transfer to so as to improve the rate: https://www.moneysavingexpert.com/savings/help-to-buy-isa/#bestbuys

Thanks! Can you transfer all £12,000 in another HTB ISA in one go? When transfering to LISAs you are still limited to £4000 a year so may be that they'll limit you to £200 a month?

masonic

jake_jones99 said:

masonic said:

Unless you are 2.5 years+ away from being in a position to buy, or will not meet the rules of the HTB ISA scheme, you'd be better off taking the interest hit and collecting the 25% bonus from this ISA rather than building up your LISA.

There are a few options you could transfer to so as to improve the rate: https://www.moneysavingexpert.com/savings/help-to-buy-isa/#bestbuys

Thanks! Can you transfer all £12,000 in another HTB ISA in one go? When transfering to LISAs you are still limited to £4000 a year so may be that they'll limit you to £200 a month?

You can transfer HTB ISAs in full. It is only LISAs that treat transfers from other types of ISAs as new contributions for the purpose of the lower £4k annual limit (and likewise, a lump sum cannot be transferred in to a HTB ISA, except from another HTB ISA).

jake_jones99

Okay that sounds like a good idea, only that HTB ISAs are now closed to new applicants... So i can't open any new ones in another bank in order to transfer the money.

masonic

jake_jones99 said:

Okay that sounds like a good idea, only that HTB ISAs are now closed to new applicants... So i can't open any new ones in another bank in order to transfer the money.

Existing HTB ISA holders are able to open new accounts to transfer in, as described in the link I posted above.

jake_jones99

Thanks a lot I missed that detail. That's certainly the solution for me. Meanwhile I can start filling out my LISA anyway, since I can use it just like my stocks and shares. And if it takes more than 3y to buy a house I'll be better off.

eskbanker

jake_jones99 said:

Thanks a lot I missed that detail. That's certainly the solution for me. Meanwhile I can start filling out my LISA anyway, since I can use it just like my stocks and shares. And if it takes more than 3y to buy a house I'll be better off.

Is it wise to be investing in stocks and shares if you're concurrently trying to assemble a first property deposit?

jake_jones99

eskbanker said:

jake_jones99 said:

Thanks a lot I missed that detail. That's certainly the solution for me. Meanwhile I can start filling out my LISA anyway, since I can use it just like my stocks and shares. And if it takes more than 3y to buy a house I'll be better off.

Is it wise to be investing in stocks and shares if you're concurrently trying to assemble a first property deposit?

I'm mainly investing in money market funds, or investment grade bond etfs. Those are the safest options are there, almost as safe as a savings account. It desn't have FSCS protection, but it's safe enough for me keep going with it enjoying tax relief on large sums. 

eskbanker

jake_jones99 said:

eskbanker said:

jake_jones99 said:

Thanks a lot I missed that detail. That's certainly the solution for me. Meanwhile I can start filling out my LISA anyway, since I can use it just like my stocks and shares. And if it takes more than 3y to buy a house I'll be better off.

Is it wise to be investing in stocks and shares if you're concurrently trying to assemble a first property deposit?

I'm mainly investing in money market funds, or investment grade bond etfs. Those are the safest options are there, almost as safe as a savings account. It desn't have FSCS protection, but it's safe enough for me keep going with it enjoying tax relief on large sums. 

Fair enough, I took your reference to "my stocks and shares" at face value, rather than interpreting it to mean money market funds and bonds!

jake_jones99

I have an appointment with Yorkshire Building society to transfer my ISA, thanks a lot for the advice and fingers crossed!