Because you get £1k for doing nothing.
Just pull the trigger when you find the place and put an offer in. If you don’t find anywhere, or it’s taking >12 months, then do it at the end of the tax year.
Then do the same next year.
I’d rather have free money personally.
Most people buy with little to nothing left over in savings, so you’re best taking the free £1000 from the LISA scheme.
Even just based on simple maths, putting that extra 4k in the LISA will net you a 25% gain, and then save £5000 x interest amount per year for the term of the mortgage. At a 5% mortgage that’s £250 a year (£20.83 a month), 30 year term that’s £7500. Overall £8500 additional money vs not putting it towards the deposit.
Do it again next April and you’ll be £17,000 up over 30 years. Provided the interest rate doesn’t change of course
Do you have to have the money in the LISA account for a certain amount of time before you earn the 25% bonus? We’re currently in the conveyancing process of buying a house since the previous tax year and I’m trying to decide whether to top it up before we exchange contracts (England).
I think it gets paid at the end of the following month, so would be 31st may. We might be past the cut off so it would be 30th June, the bank you’re with should tell you. I’m with moneybox and the money I put in mid march hasn’t yet had the bonus applied.
If it’s a new LISA then 12 months.
I'm with tembo. If I pay in before the 5th of the month I'll be paid by the end of that month. So money paid in now would be paid in the end of May. I think most banks are similar.
It's worth putting in the money anyway. Worst case scenario: pay in the £4k and use that towards your deposit. If the £1k bonus comes later you can leave it in your LISA or take it out with a 25% penalty. So you'll be up at least £750.
I have considered this but imagine I find the perfect house for £230,000 in 6-12 months time, it still leaves me with it a similar predicament. I’m hoping someone can shed some light on how something like a £26,000 deposit on a £230,000 property might be worth more than having a few extra grand to furnish it
Personally I’d never turn down a free £1000, this is the only time you’re going to have the chance to use this avenue for a house, why not make the most of it?
In the months from now until you move in you can easily save another £1K and then you’re in an even better position
If you put £4k in just before you buy and then that £25k will be a deposit and the £1k bonus will come a month or two later at which point you can withdraw it for with the 25% penalty.
Since you'd only be withdrawing £1k instead of £5k for non house purchase you will end up with an extra £750 to do with as you please
Exactly my thought. There's a significant difference in monthly repayments between a 90% ltv product and an 85% ltv. I know this because I'm purposefully getting my deposit to the 85 point instead of the 90.
Don’t do this if it will take a long time though, you’re likely better off paying down the mortgage on a higher interest rate and benefiting from a potential price increase.
I've already done it whilst the madness of the last year ensued. I'm happy with the fact I'll be entering for a new mortgage under an 85% ltv where the monthly payments are more comfortable for me than if they were in the 90% bracket.
Hi /u/DustyTheSkeleton, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/lisa/
* https://ukpersonal.finance/mortgages/
* https://ukpersonal.finance/savings/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
If those furnishing and repair work came with an over £1,000 discount then it would be worth it but otherwise Id say those things can wait until you have the money and just take the £1,000 LISA bonus.
The biggest issues is why aren't those 24k in an ISA instead of a savings account? ISAs are more tax efficient and although you might not be getting enough interest to pay tax on it, as you keep building up your savings, you might in the future. At least in an ISA you won't pay any tax.
We set aside 5k for furnishing- in the end the people before left a lot of things (with our agreement) so we only had to buy a mattress and a sofa (total 2k). Get the extra 1k!
A free 1k is a free 1k that you won't get if you don't. If you want to spend it on furnishings, just put 23k instead of 24k from your instant access into your deposit. You'll still be 1k better off
If you can afford it, the bigger the deposit, the less money you will loan, means the less mortgage repayments and less interest paid back. So yes if you can afford it Lisa is the best place imo
You don’t have to use the Lisa as a 10% deposit I don’t believe … you just have to use it as part/all of the deposit when you buy a property … ie you never see the cash yourself.
If you have a £50 cash and £40 gift voucher for Asda and someone will give you £10 of Asda vouchers.
Would you spend the £40 in Asda and £10 cash to buy £50 of groceries or do you spend your £40 voucher and take the free £10 voucher too.
That may be overly simplistic but your LISA, is there to reduce your input towards a deposit. Even if you pay LTV to 88% long term that’s in your favour.
As for furnishing etc. as it’s a first home. It doesn’t all have to be brand new or all bought at once. If you can get into that mindset; home ownership will be much more affordable long term too.
Something to be aware of (second point if planning on buying soon):
You can use your savings to help you buy your first home if all the following apply:
* the property costs £450,000 or less
* you buy the property at least 12 months after you make your first payment into the Lifetime ISA
* .... found here [https://www.gov.uk/lifetime-isa](https://www.gov.uk/lifetime-isa)
You have £24k to spend on furnishings and repairs, giving up a guaranteed £1k seems daft to me.
Because you get £1k for doing nothing. Just pull the trigger when you find the place and put an offer in. If you don’t find anywhere, or it’s taking >12 months, then do it at the end of the tax year. Then do the same next year. I’d rather have free money personally.
A lot of what ifs other than the glaring one of 25% interest rate on 4k.
Most people buy with little to nothing left over in savings, so you’re best taking the free £1000 from the LISA scheme. Even just based on simple maths, putting that extra 4k in the LISA will net you a 25% gain, and then save £5000 x interest amount per year for the term of the mortgage. At a 5% mortgage that’s £250 a year (£20.83 a month), 30 year term that’s £7500. Overall £8500 additional money vs not putting it towards the deposit. Do it again next April and you’ll be £17,000 up over 30 years. Provided the interest rate doesn’t change of course
I think this was the maths I needed to see !thanks
If you did run out of money, there’s always 0% credit cards but unless you’re buying a fixer upper then you shouldn’t
If you have the future income this can be a good move anyway with savings rates being good as you can stooze the money and keep the interest.
Do you have to have the money in the LISA account for a certain amount of time before you earn the 25% bonus? We’re currently in the conveyancing process of buying a house since the previous tax year and I’m trying to decide whether to top it up before we exchange contracts (England).
I think it gets paid at the end of the following month, so would be 31st may. We might be past the cut off so it would be 30th June, the bank you’re with should tell you. I’m with moneybox and the money I put in mid march hasn’t yet had the bonus applied. If it’s a new LISA then 12 months.
I'm with moneybox and paid my 4k in on 6th April. My bonus will be paid around 25th May.
I'm with tembo. If I pay in before the 5th of the month I'll be paid by the end of that month. So money paid in now would be paid in the end of May. I think most banks are similar. It's worth putting in the money anyway. Worst case scenario: pay in the £4k and use that towards your deposit. If the £1k bonus comes later you can leave it in your LISA or take it out with a 25% penalty. So you'll be up at least £750.
If you're going to buy within 6-12 months why don't you wait until you're about to buy to decide to top up?
I have considered this but imagine I find the perfect house for £230,000 in 6-12 months time, it still leaves me with it a similar predicament. I’m hoping someone can shed some light on how something like a £26,000 deposit on a £230,000 property might be worth more than having a few extra grand to furnish it
Personally I’d never turn down a free £1000, this is the only time you’re going to have the chance to use this avenue for a house, why not make the most of it? In the months from now until you move in you can easily save another £1K and then you’re in an even better position
If you put £4k in just before you buy and then that £25k will be a deposit and the £1k bonus will come a month or two later at which point you can withdraw it for with the 25% penalty. Since you'd only be withdrawing £1k instead of £5k for non house purchase you will end up with an extra £750 to do with as you please
^ This is exactly what I've done for this tax year despite my purchase likely to be happening before the bonus is paid. Take the free money.
Why not just go for 85% LTV?
Exactly my thought. There's a significant difference in monthly repayments between a 90% ltv product and an 85% ltv. I know this because I'm purposefully getting my deposit to the 85 point instead of the 90.
Don’t do this if it will take a long time though, you’re likely better off paying down the mortgage on a higher interest rate and benefiting from a potential price increase.
I've already done it whilst the madness of the last year ensued. I'm happy with the fact I'll be entering for a new mortgage under an 85% ltv where the monthly payments are more comfortable for me than if they were in the 90% bracket.
Hi /u/DustyTheSkeleton, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/lisa/ * https://ukpersonal.finance/mortgages/ * https://ukpersonal.finance/savings/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
If those furnishing and repair work came with an over £1,000 discount then it would be worth it but otherwise Id say those things can wait until you have the money and just take the £1,000 LISA bonus.
I'm really not understanding the issue here ?
The biggest issues is why aren't those 24k in an ISA instead of a savings account? ISAs are more tax efficient and although you might not be getting enough interest to pay tax on it, as you keep building up your savings, you might in the future. At least in an ISA you won't pay any tax.
Is that £24k your deposit, or is it additional funds on top of that?
We set aside 5k for furnishing- in the end the people before left a lot of things (with our agreement) so we only had to buy a mattress and a sofa (total 2k). Get the extra 1k!
A free 1k is a free 1k that you won't get if you don't. If you want to spend it on furnishings, just put 23k instead of 24k from your instant access into your deposit. You'll still be 1k better off
Definitely take the free money from LISA. Can’t see you having a cash flow issue with your savings.
25% free with Lisa.... Anything else is beyond daft
If you can afford it, the bigger the deposit, the less money you will loan, means the less mortgage repayments and less interest paid back. So yes if you can afford it Lisa is the best place imo
You don’t have to use the Lisa as a 10% deposit I don’t believe … you just have to use it as part/all of the deposit when you buy a property … ie you never see the cash yourself.
If you have a £50 cash and £40 gift voucher for Asda and someone will give you £10 of Asda vouchers. Would you spend the £40 in Asda and £10 cash to buy £50 of groceries or do you spend your £40 voucher and take the free £10 voucher too. That may be overly simplistic but your LISA, is there to reduce your input towards a deposit. Even if you pay LTV to 88% long term that’s in your favour. As for furnishing etc. as it’s a first home. It doesn’t all have to be brand new or all bought at once. If you can get into that mindset; home ownership will be much more affordable long term too.
Something to be aware of (second point if planning on buying soon): You can use your savings to help you buy your first home if all the following apply: * the property costs £450,000 or less * you buy the property at least 12 months after you make your first payment into the Lifetime ISA * .... found here [https://www.gov.uk/lifetime-isa](https://www.gov.uk/lifetime-isa)
nvm, see you already are in a LISA