Lifetime ISA withdrawal FTB

St_95

Hi all, firstly apologies if this should be in the house buying forum instead. It is a specific LISA question so I assumed this would be best asked here!

We are not far from exchanging contracts, all of our deposit is held in two LISA's. We understand that LISA's can be used on exchange, however the property must be completed within certain timelimits (that can be extended to a max of 180 days).

Our solicitor has now said they don't want to use the LISA on exchange as they are worried the property may not complete in time. However, we have an anticipated date set for completion of November. The property is plastered and we are now just awaiting installation of kitchen etc.

We have been told that the vendor may accept a 2k reduced deposit and the rest on completion. However, that is a lot of money for us to use from the funds set aside for internal fit out etc.

What we want to know is, can we withdraw 2k from the LISA now (through solicitor) for exchange, and the remaining at completion without incurring any withdrawals. We understand that multiple withdrawals can be made providing they are on the same property? Is this understanding correct?

eskbanker

The good news is that https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#withdrawals-for-first-time-residential-purchase confirms that:

The investor can make several charge free withdrawals from their LISA for a first time residential purchase. [...] Providing the relevant conditions are met for each withdrawal made for first time residential purchase.

but unfortunately those conditions include:

A charge-free withdrawal from a LISA for a first time residential purchase can only be made if:

• [...]
• the purchase is expected to be completed within 90 days of withdrawing funds from a LISA

so splitting withdrawals wouldn't actually buy more time in the way that you're hoping for.

St_95

eskbanker wrote: »

The good news is that https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#withdrawals-for-first-time-residential-purchase confirms that:but unfortunately those conditions include:so splitting withdrawals wouldn't actually buy more time in the way that you're hoping for.

Apologies I should have been more clear. The splitting of the withdrawals isn't to extend the time limit.

It is down to our solicitor not wanting to "hold our money". Now I am of the understanding they wouldn't be holding our money anyway. The £2,000 would be sent to the vendor on exchange?

I understand they are doing it to reduce our exposure to the 25% charge - ie if we sent the whole deposit now and the property didn't complete within the 180 days maximum (subject to the extensions) we would have to pay 25% as a charge.

So as a middle ground, we are hoping to propose that £2,000 is paid now on exchange (lets call that the risk amount - potential 25% charge) and then withdraw the remaining on completion that is due for Nov'.

With the stage of build we are at now, it would be very strange for a delay of up to 180 days pushing us into March.

All things well, we will have completed within 90 days anyway, without the need for an extension.

diggingdude

Neither you or your solicitor have read about the LISA properly (I'm assuming a Skipton one). Your solicitor can apply for two extensions before returning the money penalty free. Read the conveyancers declaration form

eskbanker

diggingdude wrote: »

Neither you or your solicitor have read about the LISA properly (I'm assuming a Skipton one). Your solicitor can apply for two extensions before returning the money penalty free. Read the conveyancers declaration form

Seems to me that OP has read about the LISA properly, and correctly concluded a potential cumulative total of 180 days, as broken down (90/60/30) in the definitive guidance referred to above:

When a property purchase is proceeding towards completion but is not expected to complete within 90 days of the funds being withdrawn from the LISA the investor’s conveyancer can ask the LISA manager for a 60 day extension followed by a further 30 day extension, if required.

Are you suggesting that OP's reference to a potential extended total timescale of 180 days is inaccurate, and if so, what do you contend that the answer is?

St_95 wrote: »

We understand that LISA's can be used on exchange, however the property must be completed within certain timelimits (that can be extended to a max of 180 days).

St_95 wrote: »

if we sent the whole deposit now and the property didn't complete within the 180 days maximum (subject to the extensions)