Insight
Buying a Property with the help of a Lifetime ISA
Anyone aged between 18 and 40 can now open a Lifetime ISA (LISA). This is identical to opening a regular ISA through a bank or building society except that you can only open one Lifetime ISA.
The government will provide a bonus of 25% on contributions made up to the end of the tax year. The maximum bonus would be £1,000 based on contributions of up to £4,000 per year.
The LISA funds can be used in one of two ways; for the purchase of your first property, or for your retirement fund. We will look at how it can be used towards your first home.
The LISA funds (including any bonus) can be withdrawn for a first time residential purchase provided you meet the following criteria:
- The property costs £450,000 or less
- You are not withdrawing more than the cost of the property
- You will reside in the property
- The property is being purchased with a mortgage
- The LISA has been opened at least 12 months previously
If you hold both a LISA and a Help to Buy ISA you can only use the bonus from one of these schemes towards your first home. If you are buying jointly with another person who also has a LISA, this bonus can also be used.
If you intend to use funds from your LISA you need to let your conveyancer know as soon as possible and let them have details of the account. They will then obtain the relevant forms to be completed and submitted to the ISA Manager, i.e. the bank or building society. You will be asked to fill in and sign an “Investor Declaration” confirming your details as well as those of the property and your conveyancer.
Your conveyancer will then submit your declaration together with the Conveyancer Declaration to the ISA Manager and request the funds in readiness for the purchase. This can take up to 30 days to be processed, so it is important you let your conveyancers have the details as soon as possible.
Once the funds have been received these can be held on account by the conveyancers for a further 90 days, by which time the purchase of the property should be completed. If not, funds are returned to the ISA Manager and can be re-requested again when you are ready to proceed. If not, funds are returned to the ISA Manager and can be re-requested again when you are ready to proceed.
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