MSE News: Lifetime ISA withdrawal penalty scrapped for 2017/18

Ed-1

Lingua wrote: »

I know how you feel ... I didn't realise the LISA needed a mortgage (whereas the HtB ISA can be outright purchase), which scuppers any plans I had of using the LISA to help buy my first home.


Lingua

Both have to be bought using a mortgage.

Can I buy a property without a mortgage and be eligible for a government bonus?
No. The property you are buying must be mortgaged in order to be eligible for the government bonus.

https://www.helptobuy.gov.uk/help-to-buy-isa/faq/

Also, see regulation 6 of the draft LISA regulations:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/562893/LifetimeISA_regs_7.pdf

colsten

Lingua wrote: »

I know how you feel ... I didn't realise the LISA needed a mortgage (whereas the HtB ISA can be outright purchase), which scuppers any plans I had of using the LISA to help buy my first home.

If you are able to purchase your first property without the help of a mortgage you hardly need the support of the taxpayer for it.

You can however still make use of a LISA if you use it for savings that you won't be touching until your 60th.

Lingua

colsten wrote: »

If you are able to purchase your first property without the help of a mortgage you hardly need the support of the taxpayer for it.

You can however still make use of a LISA if you use it for savings that you won't be touching until your 60th.

The property will cost 20-30k - I'm aiming to buy small and then save to buy a more comfortable home in future. So anything I save now will benefit that. I can always look into whether a 5yr fixed mortgage might still save money due to receiving the bonus.
Lingua

bobobski

bowlhead99 wrote: »

The charging of a penalty to recover the freebie before you actually got anything free would have been a bit silly

But this confuses me - you save £4k, they give you £1k. 25% of £5k is £1,250. Not to make myself sound *too* dumb, but is this reference to a 25% reduction deliberate or should it be 20%? It's very harsh, especially after a few years.

My concern is that by the time I can afford to buy house prices in my area will have risen beyond £450k. In that situation, I would not be able to use the LISA for the purchase so fair enough I'd lose the bonus, but why should I be penalised?

Ed-1

bobobski wrote: »

But this confuses me - you save £4k, they give you £1k. 25% of £5k is £1,250. Not to make myself sound *too* dumb, but is this reference to a 25% reduction deliberate or should it be 20%? It's very harsh, especially after a few years.

My concern is that by the time I can afford to buy house prices in my area will have risen beyond £450k. In that situation, I would not be able to use the LISA for the purchase so fair enough I'd lose the bonus, but why should I be penalised?

It's deliberately higher than 20% to recoup both the original bonus (in cash terms) plus any growth on that bonus (so it recoups the bonus in something close to real terms) plus a small charge to disincentive withdrawals.

Lingua

bobobski wrote: »

But this confuses me - you save £4k, they give you £1k. 25% of £5k is £1,250. Not to make myself sound *too* dumb, but is this reference to a 25% reduction deliberate or should it be 20%? It's very harsh, especially after a few years.

My concern is that by the time I can afford to buy house prices in my area will have risen beyond £450k. In that situation, I would not be able to use the LISA for the purchase so fair enough I'd lose the bonus, but why should I be penalised?

You'd buy the smallest / cheapest property that fits your needs and work your way up I imagine? Just having a property, even a small one, would save paying rent and let you put that money towards the mortgage and your own savings.

If you can't find a property for under 450k in your area, that's concerning :eek: