Using LISA to pay off debt

robfranklin

Morning all,

I've recently applied for a share to buy property, and I have £3000 of debt on a 0% credit card. I have enough in my LISA to wipe this completely. I am being gifted other money by family. My question is, should I use the LISA to pay down the debt now before I start doing applications? I won't have access to my gift money for quite a while, so want to move fast.

Thanks!

Rob

[purplesignup][/purplesignup]

macman

Why would you want to clear debt at 0%, if you can service it, and unless it affects your application?
You are aware that withdrawing cash from a LISA for anything other than buying a property will incur a 25% tax penalty (i.e. you lose the entire tax free bonus that you currently enjoy)?

-taff

And your post doesn't make sense.
If you're not getting your gifted money for a while, how are you going to pay the deposit?
Also be aware that if you are using a gifted deposit, as in, the mortgage lenders might ask where the deposit is coming from, they will want proof it's a gift, not a loan.

robfranklin

Thanks for replying Taff, it’s an odd one but yes the amount is a gift, I already have proof of this.

I do service the debt monthly, I’m just concerned I’ll be penalised for having a credit card debt, so unsure whether it’s best to have a debt and a larger deposit or no debt and a slightly smaller deposit.

If that makes sense

-taff

Are you employing a broker?
They [the mortgage company] might make it a condition of the mortgage to pay it off.
As above, I'd be looking at paying it off without sacrificing a 25% windfall.
It also depends on your affordability.