Lifetime vs Help to buy ISA

jake_jones99

I can confirm my Htb isa has been transferred after around a month from my original request. Still, the interest rate is doubled, so worth it. Thanks everyone.

B0bbyEwing

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

If I've understood right you're saying HTB ISA is better than LISA for a house purchase. 

I thought a LISA was better as can't that money be accessed earlier in the process? I'm sure I read that somewhere. 

Curious to the answer on that. I have 1 sibling left yet to purchase their first home & they're currently maxing out their LISA each year which involves withdrawing money from their HTB to make up the 4k (20k limit won't get touched so withdraw/transfer is a non starter anyway). 

jake_jones99

B0bbyEwing 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

If I've understood right you're saying HTB ISA is better than LISA for a house purchase. 

I thought a LISA was better as can't that money be accessed earlier in the process? I'm sure I read that somewhere. 

Curious to the answer on that. I have 1 sibling left yet to purchase their first home & they're currently maxing out their LISA each year which involves withdrawing money from their HTB to make up the 4k (20k limit won't get touched so withdraw/transfer is a non starter anyway). 

No if you're sure you'll buy a house Lisa is better. In my case I already maxed out my HTB isa, and I can't use the bonus from both. So until my LISA reaches 12000 which is 3 years htb is a better option for me.

masonic

Providing there is enough time to move the money from HTB to LISA, then LISA is best. That won't be the case for someone buying within a short time of opening a LISA, but with several years of HTB ISA contributions.

jake_jones99

masonic said:

Providing there is enough time to move the money from HTB to LISA, then LISA is best. That won't be the case for someone buying within a short time of opening a LISA, but with several years of HTB ISA contributions.

Another thing to bare in mind: in the case of HTB, if you change your mind and pull all money out, you only lose the 25% govt bonus. For LISA, if you do the same, they charge you 25% of the larger sum (including the 25% bonus), which means you lose ~6% of your original deposit. 

Albermarle

jake_jones99 said:

masonic said:

Providing there is enough time to move the money from HTB to LISA, then LISA is best. That won't be the case for someone buying within a short time of opening a LISA, but with several years of HTB ISA contributions.

Another thing to bare in mind: in the case of HTB, if you change your mind and pull all money out, you only lose the 25% govt bonus. For LISA, if you do the same, they charge you 25% of the larger sum (including the 25% bonus), which means you lose ~6% of your original deposit. 

Martin Lewis has been prodding the government to change this rule ( so when you withdraw you only lose the added bonus) and to increase the house price limit that you can use a LISA for.
It is possible it will be in the Autumn statement next Wednesday, or maybe not....

masonic

jake_jones99 said:

masonic said:

Providing there is enough time to move the money from HTB to LISA, then LISA is best. That won't be the case for someone buying within a short time of opening a LISA, but with several years of HTB ISA contributions.

Another thing to bare in mind: in the case of HTB, if you change your mind and pull all money out, you only lose the 25% govt bonus. For LISA, if you do the same, they charge you 25% of the larger sum (including the 25% bonus), which means you lose ~6% of your original deposit. 

It's worse than that in most cases. If you don't use a LISA for its intended purpose, then very likely you've suffered the opportunity cost of a low interest rate for several years on the money deposited, which could come to more than the 6.25% loss of capital.

jake_jones99

masonic said:

jake_jones99 said:

masonic said:

Providing there is enough time to move the money from HTB to LISA, then LISA is best. That won't be the case for someone buying within a short time of opening a LISA, but with several years of HTB ISA contributions.

Another thing to bare in mind: in the case of HTB, if you change your mind and pull all money out, you only lose the 25% govt bonus. For LISA, if you do the same, they charge you 25% of the larger sum (including the 25% bonus), which means you lose ~6% of your original deposit. 

It's worse than that in most cases. If you don't use a LISA for its intended purpose, then very likely you've suffered the opportunity cost of a low interest rate for several years on the money deposited, which could come to more than the 6.25% loss of capital.

Not really, at this point in time you can use your LISA to buy a money market fund that gives you the BoE rates. My AJ Bell LISA provider allows this. I don't know what would happen in a low interest rate scenario, but I don't think that will come anytime soon.

masonic

jake_jones99 said:

masonic said:

jake_jones99 said:

masonic said:

Providing there is enough time to move the money from HTB to LISA, then LISA is best. That won't be the case for someone buying within a short time of opening a LISA, but with several years of HTB ISA contributions.

Another thing to bare in mind: in the case of HTB, if you change your mind and pull all money out, you only lose the 25% govt bonus. For LISA, if you do the same, they charge you 25% of the larger sum (including the 25% bonus), which means you lose ~6% of your original deposit. 

It's worse than that in most cases. If you don't use a LISA for its intended purpose, then very likely you've suffered the opportunity cost of a low interest rate for several years on the money deposited, which could come to more than the 6.25% loss of capital.

Not really, at this point in time you can use your LISA to buy a money market fund that gives you the BoE rates. My AJ Bell LISA provider allows this. I don't know what would happen in a low interest rate scenario, but I don't think that will come anytime soon.

That's a fair point, but very few people have been canny enough to open a S&S LISA when saving for a first home.

It would have been a poor option during the 2010s and early 2020s, as the ongoing fees would have swallowed most of the returns.