Keep HTB ISA or transfer to a normal ISA?

ThorOdinson

I have about £12,000 in a Help To Buy ISA. I think it's unlikely that I will use it before it expires at the end of 2029, but it might happen if by some miracle some affordable houses that aren't complete crap get built. I may also inherit share of a property and want to buy my siblings out, but again it depends if there is a house price crash and it becomes affordable.

I also have an ISA at 4.7% that can accept 20k this year, and a savings account that tracks no lower than 1% below the base rate.

Is it better to keep the HTB ISA or to transfer to somewhere else?

gravel_2

I'm not sure if H2B can be used in that buyout scenario as owning a property disqualifies you. If you inherit the property you may end up on the title. It may be a sequencing issue and if you buy it from the estate it could work? Something to explore...

You could over the course of 3 years transfer the value of the H2B into a LISA, immediately benefit from the 25% bonus and unlock a house price of £450k anywhere in UK. This is only helpful if you plan to use the LISA to buy a property or are content to not have access to the funds (without penalty) until you are 60. You can also continue to pay in £4k a year and get the 25% bonus until you hit 50 years old.

Your comment on "accept 20k" may be misplaced. Your H2B ISA money is already inside an ISA. If you transferred it to a different cash or stocks ISA this would not count as new subscriptions and you would still be able to contribute 20k of 'new money' into the ISA. So in theory, if you have the cash, you could transfer H2B and pay in 20k for a total of ~£32k additional money in your existing ISA this tax year.

ThorOdinson

Thanks gravel_2. I'm too old for a LISA. That's the other issue, even if by some miracle houses do become affordable, I am already too old to get a full 25 year term mortgage unless I work past retirement age.

Good point about the ISA transfer. I don't have 20k to put in, but I was thinking about moving the money from the savings account. I need to look at the details, about quick access and so forth. My car is dying so I may need to buy a new one.

masonic

The interest rate of the HTB ISA would be material in deciding whether moving to a rate of 4.7% and losing the possibility of a bonus is worth it.

Jami74

I very nearly did this a couple of years ago. But I didn't and now an unexpected relocation opportunity means I can buy a property for less than £250k. It was something I deliberated over on and off and came very close a few times to moving it out. Maybe work out how long it would take to make up the £3k (bonus if you buy) with the difference in interest between the HTB and your chosen ISA.

ThorOdinson

The HTA ISA is at 3.5%. So the time to make up the difference will be quite long, assuming I can ever make use of it.

masonic

ThorOdinson said:

The HTA ISA is at 3.5%. So the time to make up the difference will be quite long, assuming I can ever make use of it.

If you are confident you will not use it, then the interest difference is enough to have an impact. If it were only a small difference it might be worth keeping it on the off-chance your circumstances change.

ThorOdinson

It's sounds like I'm probably not going to be able to use it. Maybe Labour will somehow halve house prices back to sensible levels, but more likely I'll inherit a share of a property and that will disqualify me from using it anyway.