Lifetime ISA - Government Bonus for House Purchase

Gibbles2Biggles · 12 February 2018 at 8:10PM

My husband and I both have LISA's, opened on 6 April 2017. We are at the start of the process of buying a house that will be an "eligible purchase" for the purposes of receiving the government bonus for our deposit.

We know the LISA's have to have been open for one year to be eligible for the bonus. I am hearing that the bonuses however are not payable until 6-7 May 2018 i.e. a month after we become "eligible".

We need the government bonus as part of our deposit. Does this mean that we cannot exchange contracts until or after 8 May 2018 when we will have our bonus? Our investment provider has confirmed we are eligible for the bonus after 7 April 2018. Could this be the earliest day on which we exchange on the property?

We also know that if we withdraw our finds before the end of this tax year, we won't pay a penalty and won't get a bonus. That would be a shame but we really want to avoid a situation where (due to pressure of exchanging contracts) we withdraw after this tax year end but before May/when the government bonus will be paid – worst of both worlds!

Thank you!!

Alexland · 12 February 2018 at 8:21PM

No accounts don't need to be open for a year to get the bonus. You could open a LISA next month and still get a bonus added in May.

Accounts have to be open a year from the initial contribution date before they can be used for a qualifying property purchase without penalty.

So if you want to use the LISA for a qualifying property purchase AND recieve the bonus you would need to have the account open 12 months AND wait until it is paid into the account before using the LISA.

Also remember there might be a time gap between exchanging contracts to buy a property and the day of completion.

If you could use other money for the exchange deposit (whatever your solicitor can negotiate with the seller but normally 5% to 10%) your solicitor would not need to draw on the LISA until near the completion date.

Alex

Gibbles2Biggles · 12 February 2018 at 9:50PM

Can the LISA money be used for other related expenses e.g. Stamp duty, or deposit only?

Kim_13 · 13 February 2018 at 12:17AM

Gibbles2Biggles wrote: »

Can the LISA money be used for other related expenses e.g. Stamp duty, or deposit only?

Are you aware of the changes to stamp duty? As a first time buyer it may be that you don't have to pay any at all, see https://www.moneysavingexpert.com/mortgages/stamp-duty

The Lifetime ISA funds are not transferred to you, but to the conveyancer/solicitor.

bowlhead99 · 13 February 2018 at 7:33AM

Gibbles2Biggles wrote: »

Can the LISA money be used for other related expenses e.g. Stamp duty, or deposit only?

It can be used for the purchase price of a house only, i.e. money that is going to the seller and reducing the amount of mortgage you'd otherwise need. Your solicitor will submit paperwork to the ISA manager that says that the money withdrawn from the LISA will only be released towards paying the purchase price of the property. Not for paying the solicitor fees, paying the stamp duty, paying for searches etc.

So, the purchase price will be paid with a mortgage and with LISA funds and maybe with some other funds if you couldn't fit them in your LISA; but you will need more money on top for those other things like stamp duty and moving costs and legal fees and buildings insurance etc, so you should save other money outside your LISA for them, because it you put the money into the LISA and then used it for a non-qualifying purpose there would be a penalty bigger than the bonus you'd earned on it.

lynn_elsie · 13 February 2018 at 10:24AM

Hi
I have just transferred my help to buy to my LISA and topped up for this financial year. From April 6th 2018 would I be better saving the £4000 for 2018/19 in a higher rate savings account and then adding this as a lump sum before 5th April 2019, or would it be better to save regularly £333 per month in the LISA with it's much lower interest rate. I'm struggling to know whether it's better to get the 25% bonus paid on the monthly contributions or whether I just put the £4000 in March 2019 and would I still get the same 25% bonus ie £1000, because if so, then I think I would be better saving the money for the year elsewhere and put it in for the bonus at the end of the year . I'm unsure as I know that the bonus is now to be paid monthly and not annually, thanks for any advice

Alexland · 13 February 2018 at 10:41AM

You will get the same 25% bonus whenever you deposit your contribution during the tax year. You can get a much better return saving your money elsewhere and making the deposit towards the end of the tax year. This outweighs getting the bonus earlier. But don't cut it too fine - give time for unexpected deposit issues to be resolved.

Rachg86 · 17 February 2018 at 11:33AM

How will it work in 2018/19 when the bonus is paid monthly? My intent was to transfer in £2400 initially then top up £1600 when I had saved it. But would this effect me getting the full 25% bonus?

Alexland · 17 February 2018 at 1:14PM

That would be fine. You should still get the full 25% bonus on the £4k contribution. The bonus(s) will appear in the account a month or two after each contribution.

Lifetime ISA - Government Bonus for House Purchase

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