LISA or HtBISA; that is the question?

HtBISA

The conditions:

  • The government’s bonus will only get paid at the end of the term.
  • The bonus is only given to what you put in it — not the interest that would have been added.
  • ISA providers will give interest rates so you will see interest staking up each month (compound interest) on your savings, but not the bonus.
  • You must save over £1,600 to qualify for the bonus.
  • You and your partner can have separate ones and use the two bonuses for the same house.
  • It can’t be used for Buy to Let schemes.
  • A solicitor will need to be involved in buying the house, as they must request the bonus, and they can charge up to £60 for it.
  • When you are putting down the deposit, don’t rely on the bonus amount. You only get this when the buying process is complete and some solicitors may be reluctant to accept it. The bonus will help reduce your mortgage payments however.
  • If you decide you want to take the money out for something else, it is fine. You just won’t get the government bonus.
  • If you have a LISA, you cannot use the bonus from that and the HtBISA for your first time house.
  • You will be able to open an HtBISA with max £1,200 in it and it will get the bonus. After opening the max you can put in is £200 per month.
  • If you are buying soon, you can get to the £1,600 limit within 3 months!

In summary, HtBISAs fit into three brackets:

Okay what are LISAs:

The conditions:

  • You must be living in the UK but you don’t need to be a citizen. The house must be in the UK.
  • The LISA rates aren’t fixed like the HtBISAs are, so the Gov may change the terms. Instead, the bonus you get is directly added to your savings pot each year.
  • You must be 18–39 to open an account and you will no longer be able to put money in after 50 years of age.
  • You can be penalised the equivalent of 6.25% of what you withdraw, if for any other reason. Here is the example from Money Saving Expert:
  • If you die, the money will pass on to your beneficiaries without the penalty — but it will be liable to inheritance tax.
  • You can move your LISAs around to different providers to find the best rate.
  • If you are buying a house, the property value must be less than £450k and must be in the UK — otherwise you are penalised.
  • You cannot Buy to Let.
  • Solicitors fees will be charged and have no cap (estimated at £100).
  • If you have a LISA and a HtBISA, you may only use one of them.
  • You and your partner can both have a LISA and hence can both have the bonus.
  • You must have your LISA open for over a year to withdraw.
  • If you are not buying a property, you can only withdraw it for retirement — once you are 60+. At that point, you can withdraw it for anything you like — like a normal savings account. Similarly, it will keep gaining interest like a normal savings account and it is tax free as it is an ISA.

Note: LISAs are not pensions, they are supplementary

Graphs:

Max returns if opening from empty
The performance of Cash ISAs (Blue) vs Stocks and Shares ISAs (Orange) from https://www.cityam.com/cash-isa-vs-stock-market-isa-which-has-returned-most/
From Which: https://www.which.co.uk/money/savings-and-isas/isas/lifetime-isas-ac6mf6s7r9d5
The difference between the MoneyBox Cash ISA and the Average S&S ISA is £375

Questions/Recap:

Are you SURE you will buying a house in the UK, if at all?

Are you planning to buy within the next 10 years?

Do you think you will be able to save over £12k in the next ten years?

Have you got an idea of what you would want to pay to a mortgage per month?

Google’s mortgage calculator

Do you expect the house will cost less than £250k when you buy?

Do you expect the house will cost more than £450k when you buy?

How much do you think you will be able to save per month?

Summary

…don’t save more than you can afford to lock away

Where to get financial advice?

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