Is it worth moving my money to a lifetime ISA?

21stCenturyBlues

Hi,

I'm currently saving to buy a house and will hit £12,000 in my help to buy ISA by the summer. I don't want to buy a house where I currently work so buying a house would mean finding a new job. But I'm not sure I'll be buying a house in the next year as I'll be at my current job for at least another year (I'm mid a degree that they're financing). I also like working there so I'm dreading the job hunt.

Given that I won't be buying a house until, at the earliest, spring next year, I'm debating if it's worth opening a LISA and depositing £4,000 before the end of this tax year. My aim would be to deposit the maximum £4,000 each tax year so by spring next year I could have £12,000 in there (which would put me in the same place as my HTB ISA). However, in contrast to the HTB ISA, if I don't end up buying a house next year, I could keep adding to it and earn a higher government bonus.

My only reservations are that I don't want to take this money from my HTB ISA as I'm getting really good annual interest. I'd therefore be taking this from my other savings which I'd reserved as an emergency fund. Which would essentially leave me with less than £1,000 of easily accessible money.

My question is therefore:

1) If I deposit £4,000 as a lump sum into a LISA before April, would I get the £1,000 bonus?

2) I was under the impression I can close a HTB ISA (and keep the interest) if I don't decide to use it to buy a house with no penalty. Is this the case?

I would also appreciate any advise on whether this is a really stupid idea/other things to consider.

Thanks in advance,

21stCentury

badger09

21stCenturyBlues said:

Hi,

I'm currently saving to buy a house and will hit £12,000 in my help to buy ISA by the summer. I don't want to buy a house where I currently work so buying a house would mean finding a new job. But I'm not sure I'll be buying a house in the next year as I'll be at my current job for at least another year (I'm mid a degree that they're financing). I also like working there so I'm dreading the job hunt.

Given that I won't be buying a house until, at the earliest, spring next year, I'm debating if it's worth opening a LISA and depositing £4,000 before the end of this tax year. My aim would be to deposit the maximum £4,000 each tax year so by spring next year I could have £12,000 in there (which would put me in the same place as my HTB ISA). However, in contrast to the HTB ISA, if I don't end up buying a house next year, I could keep adding to it and earn a higher government bonus.

My only reservations are that I don't want to take this money from my HTB ISA as I'm getting really good annual interest. I'd therefore be taking this from my other savings which I'd reserved as an emergency fund. Which would essentially leave me with less than £1,000 of easily accessible money.

My question is therefore:

1) If I deposit £4,000 as a lump sum into a LISA before April, would I get the £1,000 bonus?

2) I was under the impression I can close a HTB ISA (and keep the interest) if I don't decide to use it to buy a house with no penalty. Is this the case?

I would also appreciate any advise on whether this is a really stupid idea/other things to consider.

Thanks in advance,

21stCentury

To answer your questions:
1) Yes you would receive £1k bonus 
2) Yes if you don’t use your HTB ISA for house purchase, there is no penalty but obviously you don’t get the bonus.   

It’s not clear from your post how much you have in other savings reserved as your emergency fund, but if you pay £4k into a LISA now and another £4k on or after 6 April, you would have £10k by say June. You could use some of your HTB as an emergency fund if necessary. 

Or, simply xfer £4k now & another £4k on or after 6 April from your HTB ISA & retain your emergency fund. 

One advantage of LISA over HTB is the higher house value, though obviously this might not be an issue if you buying in a cheaper area. 

21stCenturyBlues

badger09 said:

21stCenturyBlues said:

Hi,

I'm currently saving to buy a house and will hit £12,000 in my help to buy ISA by the summer. I don't want to buy a house where I currently work so buying a house would mean finding a new job. But I'm not sure I'll be buying a house in the next year as I'll be at my current job for at least another year (I'm mid a degree that they're financing). I also like working there so I'm dreading the job hunt.

Given that I won't be buying a house until, at the earliest, spring next year, I'm debating if it's worth opening a LISA and depositing £4,000 before the end of this tax year. My aim would be to deposit the maximum £4,000 each tax year so by spring next year I could have £12,000 in there (which would put me in the same place as my HTB ISA). However, in contrast to the HTB ISA, if I don't end up buying a house next year, I could keep adding to it and earn a higher government bonus.

My only reservations are that I don't want to take this money from my HTB ISA as I'm getting really good annual interest. I'd therefore be taking this from my other savings which I'd reserved as an emergency fund. Which would essentially leave me with less than £1,000 of easily accessible money.

My question is therefore:

1) If I deposit £4,000 as a lump sum into a LISA before April, would I get the £1,000 bonus?

2) I was under the impression I can close a HTB ISA (and keep the interest) if I don't decide to use it to buy a house with no penalty. Is this the case?

I would also appreciate any advise on whether this is a really stupid idea/other things to consider.

Thanks in advance,

21stCentury

To answer your questions:
1) Yes you would receive £1k bonus 
2) Yes if you don’t use your HTB ISA for house purchase, there is no penalty but obviously you don’t get the bonus.   

It’s not clear from your post how much you have in other savings reserved as your emergency fund, but if you pay £4k into a LISA now and another £4k on or after 6 April, you would have £10k by say June. You could use some of your HTB as an emergency fund if necessary. 

Or, simply xfer £4k now & another £4k on or after 6 April from your HTB ISA & retain your emergency fund. 

One advantage of LISA over HTB is the higher house value, though obviously this might not be an issue if you buying in a cheaper area. 

Thanks for your reply, it was really helpful.   I hadn't considered using my HTB as a potential emergency fund but that's true, makes me feel a lot less uneasy!

Angelica123

What is your interest rate on your HTB ISA?

21stCenturyBlues

Angelica123 said:

What is your interest rate on your HTB ISA?

3.5% with Nationwide. So less than what I would get with a new LISA but I've got a lot more money in the HTB so in the short term would be giving me more interest.

Angelica123

21stCenturyBlues said:

Angelica123 said:

What is your interest rate on your HTB ISA?

3.5% with Nationwide. So less than what I would get with a new LISA but I've got a lot more money in the HTB so in the short term would be giving me more interest.

But surely you would get even more interest if you transfer the sum from HTB into a cash ISA (or EA savings) earning 5%, and then drip feed into LISA. The only downside would be waiting a year (as then committing to using the LISA over HTB) - but it doesn't sound like you want to buy in under a year.