Help to buy ISA v Lisa

Lorrysouthall

Hi after advise, if you have roughly £8k in a help to buy isa and are looking to buy in about 18 months, continuing to contribute the max £200 a month, but would prefer to pay in £400 a month, because of rising house prices a first time home may now cost £300k, is it better to switch to a LISA asap, as potentially breaching Help to buy limits will mean no government bonus at all. Torn as when help to buy ISA was started I didn’t realise house prices would rise so rapidly. Looking to put in half a deposit for a house with a partner. Thanks in advance for any advise 🙂

gravel_2

It's not as straight forward as you've said as you can only transfer 4k per tax year to a LISA and you would then not be able to contribute any further by monthly deposits.. Someone with more direct knowledge can probably feed in but you may be best to:
1) Transfer 4k to LISA this tax year.
2) Transfer remainder of H2B to a normal easy access ISA.
3) Continue contributing to your new ISA however much you like (not exceeding your 20k annual ISA allowance).
4) Transfer another 4k to LISA after 6 April 2025.
5) If still not bought a house by 6 April 2026, do another £4k transfer to LISA.

By my quick maths this is technically only better financially if you hold the LISA until 6 April 2026. However it opens up the more expensive house price from 12 months after you open the LISA. Something for you to weigh up.

Angelica123

To me it seems a no-brainer to open a LISA and transfer money over as you are looking at houses over the 250k threshold and looking in over a year. 

At the moment, keeping your money in a HTB ISA when you are not eligible for the bonus is the equivalent of having the money in a cash ISA except you are earning lower interest. 

 Providing you haven't already used your 20k ISA allowance for 2024/25, then open a LISA and transfer 4k from the HTB. Move the rest of money in the HTB into the highest interest savings account you can (whether it's a cash ISA or conventional saver will depend on your tax situation and current ISA allowance). In April 2025, move the other 4k into the LISA. 

In the meantime, you can use a regular saver (or 2) to put in your £400/month earning interests of 7-10%. When they mature, you can add 4k to your LISA April 2026. 

I disagree with gravel_2. It's still beneficial even if you buy after a year but before April 2026 when you can add 3rd LISA contribution as a 2k bonus is still better than 0 bonus. You will have less physically in the LISA than if you kept contributing to HTB. But because you will get eligible for bonus with LISA which you won't with HTB, you will still be better off. 

PRAISETHESUN

I think if you definitely know you will buy a property, then I also agree that a LISA is probably a better choice because of the higher deposit limits (£4k/year vs £2400/year) and the higher allowed property purchase price (which you suggest you might have issues with).

Depending on your provider's rules, you can transfer £4k from your H2B ISA to a LISA and then transfer the rest to another cash ISA (or just withdraw it to non-ISA savings if the maths works out better for your interest/tax situation). You can keep making regular contributions to your new savings account as/when you have money available and then make another transfer to the LISA next tax year.

Sash24

I understand that the current Lorrysouthall said:

Hi after advise, if you have roughly £8k in a help to buy isa and are looking to buy in about 18 months, continuing to contribute the max £200 a month, but would prefer to pay in £400 a month, because of rising house prices a first time home may now cost £300k, is it better to switch to a LISA asap, as potentially breaching Help to buy limits will mean no government bonus at all. Torn as when help to buy ISA was started I didn’t realise house prices would rise so rapidly. Looking to put in half a deposit for a house with a partner. Thanks in advance for any advise 🙂

The first home one can buy can cost up to £450,000. *A Lifetime ISA (LISA) can be opened by anyone aged between 18 and 39. You can use it to save up to £4,000 a year, towards either a first home costing up to £450,000 or for retirement, and the state adds a bonus of up to £1,000 a year on top. This guide takes you through how LISAs work, if they're right for you, how you get the bonus and best buys*. A quote from MSE.

 I hope Martin's petition to the government about changing up the house value threshold for LISA will be successful.