Lifetime ISAs guide
Comments
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Don't confuse the exchange deposit (the money you agree to give the seller in advance) with the mortgage deposit (the proportion of the property you will own, that defines the LTV ratio). You will also need some cash to pay initial fees which should not come from the LISA.
Alex.[/QUOTE]
LISA can be used for either (or both) though, right ...? At least I think I read that somewhere
(Including govt bonus...)0 -
Keep it simple - on any given day you want your money in the best place to earn the best interest rate and then towards the end of the tax year you want to move it into the LISA for the 25% bonus. As long as you are getting around 1% or more you are doing better than the LISA with earlier bonus scenario.
Yes your high interest strategy is likely to use a mix of Regular Savers and other savings accounts.
Alex.
Well sure, that's what the exact strategy I have implemented and normally (under regular circumstances) I'd be inclined to agree and think the same, what has been throwing me is the second (and following...) bonuses -- as they could be achieved sooner (rather than later) by investing a new 4K ASAP at the start of the next tax year (ergo, releasing the 1K bonus also rather than later...) which then (at least in Skipton) all earns that 0.75% ... However, this would only be an additional £7.50 per annum (on the 1K bonus at least) in terms of interest - and I'm assuming doesn't outweigh the strategy we've been discussing of earning interest at higher rates (reg saver 5% / current account 3%'s) on the highest possible capital before capping in those respective accounts ? ...but again, the 0.75% is COMPOUNDING / CUMULATIVE - meaning it's a much harder calculation at the end of the day to decipher which is the harder working strategy re. 'free' money , no ?0 -
LISA can be used for either (or both) though, right ...? At least I think I read that somewhere (Including govt bonus...)
Yes the LISA can buy used for both exchange deposit (if required) and/or mortgage deposit. We have bought 4 properties (down to 1 again now) and never had to give the seller an exchange deposit as we have always exchanged and completed on the same day.
Although I try and help with lots of FTB LISA questions (using my experience of property transactions) my main LISA interest is S&S investing for retirement.
Alex0 -
..but again, the 0.75% is COMPOUNDING / CUMULATIVE - meaning it's a much harder calculation at the end of the day to decipher which is the harder working strategy
The interest rate difference is substantial enough that it's clearly more interest to have the money earning say 3% or 5% than an extra 25% of the money earlier earning 0.75% interest. As such contribute to the cash LISA towards the end of the tax year.
£1000 at 3% would be £30 annual interest
£1250 at 0.75% would be £9.38 annual interest
Don't get confused by the compounding - it's about how much money you will have at the point of making next year's LISA contribution. You don't get a bonus on the growth within a LISA anyway so it doesn't matter if the interest occurs inside the LISA wrapper or not. Just because the interest is outside the LISA doesn't mean you are going to spend the money. Ok some people might.
Infact if the interest is outside the wrapper you could probably save it in future years elsewhere at a better interest rate and it will of course compound. Or stick the interest earned elsewhere into the LISA for a 25% bonus if you were not otherwise going to be able to add the full £4k.
Do a spreadsheet if you don't believe me.
Alex0 -
Hi I wonder if anyone can advise, it is proving to get an answer from HMRC and building society. I have a help to buy ISA and would like to switch to a LISA as I am buying my first house and will be able to save more and receive a larger bonus. However, the property is a new build to be completed in 2020 but I need to exchange in 28 days. If I exchange and only had my Lisa for less than a month will that prevent me receiving the bonus in two years time when I complete the purchase? Any advice appreciated. Regards0
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Hi all. I am looking for a way to save for the future and retirement. I have no paid income, and therefore cannot pay into a Pension Scheme. Is a Lifetime ISA a good option or a Cash ISA in general, as I would like to make regular deposits? Do you have any other suggestions please? Regards.0
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Hi I wonder if anyone can advise, it is proving to get an answer from HMRC and building society. I have a help to buy ISA and would like to switch to a LISA as I am buying my first house and will be able to save more and receive a larger bonus. However, the property is a new build to be completed in 2020 but I need to exchange in 28 days. If I exchange and only had my Lisa for less than a month will that prevent me receiving the bonus in two years time when I complete the purchase? Any advice appreciated. Regards
I just double checked the HMRC ISA Managers Guide for you - the LISA needs to be open 12 months from the initial contribution before money can be withdrawn without penalty and with bonus towards a qualifying property purchase.
So provided you don't need to withdraw to pay the exchange deposit (use money from elsewhere) then you are fine to continue contributing to the LISA and use it in 2020 to purchase the property.
Alex0 -
Hi all. I am looking for a way to save for the future and retirement. I have no paid income, and therefore cannot pay into a Pension Scheme. Is a Lifetime ISA a good option or a Cash ISA in general, as I would like to make regular deposits? Do you have any other suggestions please? Regards.
Even if you have no relevant earnings you are allowed to pay up to £2880 into a personal pension up to age 75 and the government will add a 25% contribution to bring the total up to £3600 per tax year. However a pension will potentially be taxed on withdrawal in future as income.
If you are under 40 a LISA allows you to pay in up to £4000 per year for a 25% bonus up to £1000 per tax year until age 50 however the money will not be taxed on withdrawal so may be a better choice. I don't know your full circumstances so cannot comment on suitability. It is worth remembering that a LISA has a penalty to withdraw before 60 and might affect entitlement to means tested benefits.
If saving for retirement in a pension or LISA then cash would not keep up with inflation. It gives you certainty that your spending power will be erroded. Stocks & Shares would be a much more suitable choice. Inflation is running at 3% and Skipton are paying 0.75%. Skipton even warn you not to use their LISA for retirement saving on their website.
S&S are more volatile as the price goes up and down so many people have a mixed portfolio of Shares and Bonds which are mostly uncorrelated to provide stability. However there will still be some ups and downs.
If making regular contributions you might want to consider a Hargreaves Lansdown S&S LISA who charge a 0.45% platform's fee and have excellent customer services.
Given this is a 20 year+ investment you might want to consider the HSBC Global Strategy Balanced fund (0.19% fund fee) or the more adventurous Blackrock Consensus 85 fund (which is discounted on HL to a 0.09% fund fee). HL might try and guide you to their Portfolio funds but the fees are really high.
Alex0 -
Hi,
I am looking for a little advice on LISA's and purchasing a 1st home.
I opened a H2B ISA when they first started and I opened a LISA when they first started last year to get the 1 year clock ticking.
I am fairly close to completion on my first home but I want to maximise the amount the Government will help me with and the seller will wait until early April to complete if I can maximise the amount I can claim.
This is what I hope to do:
In March transfer all of the H2B ISA into the LISA and top up the LISA with the extra £1600 to use the full £4k allowance. In April I will put another £4k into the LISA to max that years allowance.
I will then use this to buy the house in April and hope to claim 25% on the full amount in the LISA. Will this work? Or do I have to wait longer to claim the full bonus?
Thanks,
Kyle0 -
Kyle,
LISAs work differently to HTB ISAs - with a LISA the bonus is added into the account by the LISA provider with the first bonus due in late April or early May. The bonus on an early contribution in the next tax year should arrive in May or June. You solicitor doesn't claim the bonus but withdraws the account balance which may already contain a bonus.
Can you seller really wait this long? What if the processing of either LISA bonuses is delayed as this has never happened before? I suspect Skipton are going to hit problems as they have not been recording the interest earned on HTB transfers correctly.
Also if you want to initiate a transfer to Skipton the deadline for this tax year is the end of this month.
To be honest it sounds like you are best just using the HTB if you are already near completion rather than put people's lives on hold for months.
Alex.0
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