Using LISA to immediately overpay mortgage??

[Deleted User]

I'm looking at a LISA for a Shared Ownership property, so the mortgage will only be about £53k. Minimum for my product is £50k

I was thinking of 'topping up' my LISA (not used it this year) to get an extra £1k from the government.

Would I be able to transfer the whole lot to the solicitor and they then pass it on to the mortgage company - so it acts as an immediate overpayment, (just) within the 10% allowance?

I was thinking it would be fine, but wouldn't want it to cause any issues with either the lender or solicitors - or for the bonus!

Lender is likely to be either Kent Reliance or Skipton. If it's the former the 'overpayment' to take me below the £50k at day 1 would be extremely beneficial ('free' £1k and also their rate also isn't cheap....)

And if it is possible, is there anything I've missed? I know I can use the balance at exchange of contracts stage, which is far more than it needs to be (balance would be 20+%),

Thanks!

asm89

You can only use the LISA funds with the bonus towards your deposit, nothing else.

If you want to use the funds you've saved for anything else, you'll have to withdraw it from the LISA and be charged a 25% fee.

So you are better off only saving a total of what would be the deposit (5%?) amount in the LISA (factoring the bonus you'd get on any amount, so if you put in £2120, with the bonus you'll have your deposit. If you've already got more than that amount in the LISA, can you buy a bigger share?

Any other savings you can put towards the mortgage on completion or better yet, solicitors fees.

[Deleted User]

I've already got more in it as I wasn't sure if I'd get a normal house or S/O. If I only apply and get accepted for a mortgage of say £50k, then the rest is my deposit (although, technically speaking, I could apply for £60k and so put in less).

So the sols won't just send everything they're sent over then, they'll actually check the amounts and determine what I need? E.g. if I need £13k but they get sent £18k, they'd have to send back the extra £5k?

I did ask about buying a bigger share - Housing Association said to be assessed for the minimum as that's what everyone else is being assessed on. It seems like they 'score' everyone based on need but also net spare income etc. - so me going higher would actually be hurting my chances.

They basically said go for the minimum and staircase later.

If they offer it, I might ask again to try and get a bigger share, as that's ideally what I did want and would stop any LISA issues!

asm89

You actually have to buy the biggest share you can afford based on the SO rules. People are assessed on the minimum share as a starting point but then you have a deeper financial interview to confirm your share purchase, which they tell you.

https://www.google.com/url?sa=t&source=web&rct=j&url=https://assets.publishing.service.gov.uk/media/58d55b72e5274a06b300000e/Shared_Ownership_Sustainability_Calculator_-_June_2017__FINAL_.xls&ved=2ahUKEwinoLifusfmAhUTa8AKHdQ5C2YQFjAAegQIBRAB&usg=AOvVaw3pyEuK7ryuRJlXp7W5Awcl

Above is the calculator they use to work out what you can afford. Have a play with it based on your circumstances and the mortgage rates on offer.

It will recommend the share you should purchase based on your finances.

When withdrawing from the LISA you tell the solicitor how much to request so you can leave the remainder in there to withdraw yourself at a penalty or to put towards retirement.

With most banks you can get a mortgage or up to 4-4.5x your income, but the service charge and rent elements of SO reduce this amount.

Can I ask why you are only considering Kensington or Skipton as lenders?

[Deleted User]

I thought that was the point, I remember reading about also, technically, it being possible to purchase 1% increments so I could buy say 27% (although in practice, it probably wouldn't be done).

Maybe the Association are just establishing a common 'benchmark' for the scoring element - as there's such a high demand. I suppose if you're scoring one person based on 25% and another based on 50% it's like comparing apples and oranges.

If you assess everyone on 25%, you can then see if one person clearly blows the others out the water and so should be offered the property and then as you say, hopefully I'll then get offered a higher % later on.

I'll raise the issue of buying more again later on - but when I asked certainly the initial adviser talked about staircasing in months and years as opposed to after the initial deadline!

Thanks for the calculator - that shows me being able to afford double what I'm being assessed on, and that's using KR's interest rate!

I was considering KR only due to historic adverse (drops off very soon, but I urgently need to move so waiting months to go for a 'prime' lender isn't an option) and I've failed soft search AIPs for Nationwide & LBG (but both were owed money, so fair enough).

Skipton appear to like me, I've passed the soft search on a 'normal' purchase but you can only proceed to a S/O assessment & DIP by actually phoning (or getting a broker to do it).

I'm using a free broker (with £400+ cashback) who recommended KR. I did try to steer it towards other manual lenders as KR are pricey - but apparently ones like Ipswich & Cambridge "aren't keen". Given the value of the loan, I'd rather just have a quick offer than be spending weeks in an underwriting queue somewhere that's "not keen" only to get messed around/declined!

I'm going ask them to put it through at Skipton as that looks more promising than I thought and affordability easily fits - then if they refuse to do it I'll go direct to Skipton myself.

If they try it and I get declined, I'll have go with Kent just to get it moving - the price to pay for old mistakes I guess, but if it gets me a house and is only for 2 years...