🔔 Ask Anna - My daughter has a Help to Buy ISA and is looking for a £300,000 house. As Help to Buy is only £250,000, is there any point in transferring to a LISA?

Savers Question: 

My daughter has had a Help to Buy ISA for a couple of years. She’s looking for a house and, as now buying with a boyfriend (not a first time buyer) is spending approx. £300000. She now realised that help to buy is only £250,000. Is there any point in transferring to a LISA, as she will be buying this year? I wondered if she transferred to a LISA, would they still need to have held it for a full year?  As her boyfriend has owned before she won’t qualify for the stamp duty exception either.

Anna's Answer: 

I’m afraid that your daughter has fallen through a gap, as it seems that she will not be able to benefit from the 25% government bonus on either a Help to Buy (H2B) ISA or a Lifetime ISA (LISA).

This is because the rules of the Help to Buy ISA state that the maximum value of the property she can purchase is £250,000, if the house is outside London. And, as you’ve pointed out, although the property value for bonus qualification from a Lifetime ISA is £450,000 regardless of the location of the house, she will have to hold the latter for a full year before she can claim the bonus.

This one year rule also applies to transfers from the Help to Buy ISA, so if she wants to use her 25% bonus for the house purchase, they will either need to find a less expensive house or wait a little bit longer. I assume neither of these options are attractive.

This is really disappointing for your daughter, however, there may still be a good reason to transfer to a Lifetime ISA.

Although she may not be able to use the bonus for her first home, if she is able to keep the money she has saved, she could use this as a way to help boost her income as she approaches retirement, if she transfers to the LISA.

This is because the LISA is designed to offer the bonus when the account is cashed in either on the purchase of a first home or after the age of 60.

It probably feels like a lifetime away and I assume she has been saving into the H2B ISA in order to build up a deposit, but if there is a way for her to keep it, this will give her a boost in later life.

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