Using a Lifetime ISA for your first home
How a Lifetime ISA works when you buy, the timing and price rules that can catch you out, and what happens to the account after you move in.
How a Lifetime ISA works when you buy, the timing and price rules that can catch you out, and what happens to the account after you move in.
A Lifetime ISA is a savings account you can open between the ages of 18 and 39 and pay into until you are 50. The government adds a bonus to what you pay in, up to a yearly limit. You can use the money to buy your first home, or keep it for later life and draw it from age 60.
If you take money out for any other reason, a withdrawal charge applies. The charge can leave you with less than you paid in.
You can only use a Lifetime ISA towards your first home once the account has been open for at least 12 months. If you opened yours recently, check the date before you make an offer.
The date runs from your first payment into the account. If you are planning to buy within the next year and have not opened one, the account may not be usable in time.
A Lifetime ISA can only be used without a charge on a home below a set purchase price. If the home you buy costs more than the limit, you can still take your money out, but the withdrawal charge applies.
Check the purchase price against the current limit before you make an offer.
The limits, the bonus and the withdrawal charge are set by the government and can change. Check the current rules with your provider before you rely on any figure.
You do not withdraw the money yourself. Your conveyancer asks your Lifetime ISA provider for it, and the provider pays it to the conveyancer for the purchase. The purchase has to complete within a set time after the money is released.
Tell your broker and your conveyancer at the start that a Lifetime ISA is part of your deposit, and which provider you use. That gives the conveyancer time to request the money and keeps it in step with completion.
If you buy with a partner or friend, each of you can use your own Lifetime ISA on the same purchase, as long as each of you is a first-time buyer. If one of you has owned a home before, that person cannot use their Lifetime ISA for this purchase without the charge.
If you are not married or in a civil partnership, think about recording who paid what. Your conveyancer can explain a declaration of trust.
If you do not use all of your Lifetime ISA for the purchase, or keep paying in afterwards, it becomes a savings account for later life. You can keep paying in until you are 50 and take the money out from 60.
From then on you have a choice about where to save for retirement: a Lifetime ISA, a workplace pension with contributions from your employer, or both. Which suits you depends on your tax position, what your employer adds and your plans. If you stopped or reduced pension contributions to save for the deposit, the question of restarting them belongs in the same decision.
Yes. Your lender will want to see where each part of the deposit comes from.
The money goes back to your Lifetime ISA, subject to your provider's rules and timescales.
No. It must be a home you will live in as your only residence.
Yes, once it has been added to your account.
Your mortgage broker can check the timing and the price limit against your purchase, and make sure the lender and conveyancer know the Lifetime ISA is part of your deposit.
Whether to keep saving into a Lifetime ISA or a pension after you buy is a regulated advice question. Your broker can introduce you to a qualified financial planner.
This article explains how things work. It does not take your circumstances into account. Your mortgage broker can introduce you to a regulated financial planner at Equity & General where the question needs one.
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