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Am I making the most of my Help To Buy and LISA?
bp5678
Posts: 413 Forumite
I have a Nationwide Help To Buy account and a Skipton LISA.
I put £1200 into the help to buy when i first set it up and I'm now transferring £200 each month into the help to buy. When I come to buying my property I'll move it all into my LISA. Is that the best way to do it?
I put £1200 into the help to buy when i first set it up and I'm now transferring £200 each month into the help to buy. When I come to buying my property I'll move it all into my LISA. Is that the best way to do it?
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Comments
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It depends on timescales, as you can only transfer a maximum of £4K into a LISA in any given tax year, so if/when your HTB pot exceeds that then you need to consider how to stage the transfers.
It may make sense just to be funding the LISA directly without going via HTB but again this is dependent on individual circumstances - HTB interest rates tend to be better but the £200 monthly cap is a constraint when you can pay £4K/year into a LISA, thereby earning 25% on more.
Some max out a LISA and just put the surplus into a HTB, accepting that the latter won't be eligible for the 25% bonus but benefitting from the better interest rate, so there isn't really a one-size-fits-all answer to your question!0 -
Would it make more sense to keep my money in my HTB but then at the end of each tax year send that money into the LISA?It depends on timescales, as you can only transfer a maximum of £4K into a LISA in any given tax year, so if/when your HTB pot exceeds that then you need to consider how to stage the transfers.
It may make sense just to be funding the LISA directly without going via HTB but again this is dependent on individual circumstances - HTB interest rates tend to be better but the £200 monthly cap is a constraint when you can pay £4K/year into a LISA, thereby earning 25% on more.
Some max out a LISA and just put the surplus into a HTB, accepting that the latter won't be eligible for the 25% bonus but benefitting from the better interest rate, so there isn't really a one-size-fits-all answer to your question!
I'll confirm what my interest rates are for my HTB and LISA when I'm this evening. It should make it easier to make a better/more informed decision.
Thanks for your help so far!0 -
The LISA gives you much more flexibility than the H2B ISA and allows you to save more per year, but does come with significantly lower interest rates.
You can put £4K a year into the LISA and the £200pcm into the H2B. But you can only use one for your house purchase. So it all really depends on how much you are saving a month / in the year.
You will be able to get better rates on other regular saving account - up to 5% so it may make more sense to save outside of the ISA package and then deposit it into the LISA in end Feb / early March (in case of issues you want to leave time before the end of the financial year).
If you save more than you can put into 5% savers then the H2B is a good option to keep going.
When do you plan on buying? If it is 5+ years away you may want to consider a stocks and shares LISA but obvs with that you would risk the capital which may not be sensible for house deposit money.
Lots to think about.
Hope that makes sense.0 -
This depends on how you define flexibility - as you rightly say, you can pay more in (which is more about capacity than flexibility really), and do so all in one go, but crucially you can't withdraw money from a LISA without incurring a 25% penalty if you end up needing to do so when not buying a first-time property (or at age 60+), so in many people's eyes that makes a LISA less flexible than the HTB, from which money can be withdrawn free of penalties at any time.pink_pirlie wrote: »The LISA gives you much more flexibility than the H2B ISA0 -
This depends on how you define flexibility - as you rightly say, you can pay more in (which is more about capacity than flexibility really), and do so all in one go, but crucially you can't withdraw money from a LISA without incurring a 25% penalty if you end up needing to do so when not buying a first-time property (or at age 60+), so in many people's eyes that makes a LISA less flexible than the HTB, from which money can be withdrawn free of penalties at any time.
Thank you - the drawbacks of responding on a tiny screen at the end of a tiring day
I should have also qualified the statement to read
when buying a house it is more flexible - you can save more, use it for both exchange and completion deposits, buy a house up to a higher value, etc.
On the downside, you are unable to withdraw the money as eskbanker says without incurring a 25% penalty if you do not withdraw for a qualifying house purchase or after you turn 60.0
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