Can I still use the lifetime isa and not have a mortgage?

Savingforahouse123

Hi I’m in the fortunate position I could be a cash buyer. 

I set up a lifetime isa years ago and have been paying into it which I was going to use for a house deposit. I could only afford to be a cash buyer if I use the lifetime isa towards the house.

Can I still use the lifetime isa and not have a mortgage?

Choirgrl

You need to buy with a mortgage. https://www.moneyhelper.org.uk/en/blog/buy-or-rent-a-home/how-to-use-your-lifetime-isa-to-buy-a-home

Could you get the smallest mortgage available, and then pay off asap? Would that be more cost effective than losing the 25% if you use the LISA without a mortgage?

Savingforahouse123

Choirgrl said:

You need to buy with a mortgage. https://www.moneyhelper.org.uk/en/blog/buy-or-rent-a-home/how-to-use-your-lifetime-isa-to-buy-a-home

Could you get the smallest mortgage available, and then pay off asap? Would that be more cost effective than losing the 25% if you use the LISA without a mortgage?

Smallest mortage poss is £50k with a 2.95% interest.

If i were to borrow £70k the interest would still be 2.95% so it makes sense to do that over the 50k mortgage. Then with the disposable income from monthly repayments I get for choosing the 70k mortgage over the 50k one, I could then use that to invest in stocks and shares.

se2020

There was a temporary thing (due to covid) that allowed you to withdraw from the Lisa without penalty. 
I'm not sure if that is still going but if it is you could just use that to take the money out of the Lisa 

Savingforahouse123

se2020 said:

There was a temporary thing (due to covid) that allowed you to withdraw from the Lisa without penalty. 
I'm not sure if that is still going but if it is you could just use that to take the money out of the Lisa 

Oh that's a good point about covid (I remember that)

TripleH

Savingforahouse123 said:

Choirgrl said:

You need to buy with a mortgage. https://www.moneyhelper.org.uk/en/blog/buy-or-rent-a-home/how-to-use-your-lifetime-isa-to-buy-a-home

Could you get the smallest mortgage available, and then pay off asap? Would that be more cost effective than losing the 25% if you use the LISA without a mortgage?

Smallest mortage poss is £50k with a 2.95% interest.

If i were to borrow £70k the interest would still be 2.95% so it makes sense to do that over the 50k mortgage. Then with the disposable income from monthly repayments I get for choosing the 70k mortgage over the 50k one, I could then use that to invest in stocks and shares.

Savingforahouse123 said:

Choirgrl said:

You need to buy with a mortgage. https://www.moneyhelper.org.uk/en/blog/buy-or-rent-a-home/how-to-use-your-lifetime-isa-to-buy-a-home

Could you get the smallest mortgage available, and then pay off asap? Would that be more cost effective than losing the 25% if you use the LISA without a mortgage?

Smallest mortage poss is £50k with a 2.95% interest.

If i were to borrow £70k the interest would still be 2.95% so it makes sense to do that over the 50k mortgage. Then with the disposable income from monthly repayments I get for choosing the 70k mortgage over the 50k one, I could then use that to invest in stocks and shares.

Accepting the risks, that seems sensible although getting the shortest term mortgage you can and / or one with lowest early redemption fees might make sense. Paying the interest on £70k loan is paying interest on £20k that could be sat in your pocket. Its worth the hassle to not loose the 25% I assume?

I would look to earmark a regular monthly sum of money once mortgage free as 'mortgage' that could go into stocks and shares for a Rainy day.

Savingforahouse123

TripleH said:

Savingforahouse123 said:

Choirgrl said:

You need to buy with a mortgage. https://www.moneyhelper.org.uk/en/blog/buy-or-rent-a-home/how-to-use-your-lifetime-isa-to-buy-a-home

Could you get the smallest mortgage available, and then pay off asap? Would that be more cost effective than losing the 25% if you use the LISA without a mortgage?

Smallest mortage poss is £50k with a 2.95% interest.

If i were to borrow £70k the interest would still be 2.95% so it makes sense to do that over the 50k mortgage. Then with the disposable income from monthly repayments I get for choosing the 70k mortgage over the 50k one, I could then use that to invest in stocks and shares.

Savingforahouse123 said:

Choirgrl said:

You need to buy with a mortgage. https://www.moneyhelper.org.uk/en/blog/buy-or-rent-a-home/how-to-use-your-lifetime-isa-to-buy-a-home

Could you get the smallest mortgage available, and then pay off asap? Would that be more cost effective than losing the 25% if you use the LISA without a mortgage?

Smallest mortage poss is £50k with a 2.95% interest.

If i were to borrow £70k the interest would still be 2.95% so it makes sense to do that over the 50k mortgage. Then with the disposable income from monthly repayments I get for choosing the 70k mortgage over the 50k one, I could then use that to invest in stocks and shares.

Accepting the risks, that seems sensible although getting the shortest term mortgage you can and / or one with lowest early redemption fees might make sense. Paying the interest on £70k loan is paying interest on £20k that could be sat in your pocket. Its worth the hassle to not loose the 25% I assume?

I would look to earmark a regular monthly sum of money once mortgage free as 'mortgage' that could go into stocks and shares for a Rainy day.

So between the 50k mortgage vs 70k mortgage

Obviously the 50k one means larger deposit and 70k one smaller deposit.

Larger deposit (50k mortgage) = Less money invested in stocks from my deposit (and more money invested from lower monthly repayments)
Smaller deposit (70k mortgage) = More money invested in stocks from my deposit (and less money invested from higher monthly repayments).

Either way I want to invest in stocks as well as get a mortgage, so surely it'll be better to go for the one that incurs the lower mortgage repayments so I pay the smallest amount of interest?

TripleH

Yes, because you are only getting a mortgage to access your LISA bonus you want to pay as little interest as you can as it's dead money.

I assume the 25% bonus you will receive is greater than the interest and fees you will pay?

K_S

Savingforahouse123 said:

Hi I’m in the fortunate position I could be a cash buyer. 

I set up a lifetime isa years ago and have been paying into it which I was going to use for a house deposit. I could only afford to be a cash buyer if I use the lifetime isa towards the house.

Can I still use the lifetime isa and not have a mortgage?

@Savingforahouse123 You could just get the smallest possible mortgage on a no-fee no-ERC free-val tracker/discount product and then pay it off after completion if you wish to do so. Depending on the lender/product there may be restrictions stopping you from doing so within X months, so do clarify that.

This way the only additional fee you'll incur is the mortgage related conveyancing costs.

Word of warning - lenders don't like borrowers using a mortgage as a short term lending solution as outlined above so you may well be internally blacklisted by that specific lender if you pay it off shortly after completion. 

se2020

There is another recent thread on here that suggests it's possible to use the LISA in conjunction with a private mortgage.
I have no idea what the fees would be for setting a private mortgage up but I'm also presuming there is no minimum loan amount so potentially you could find an individual to loan you a mortgage of £100 or something and claim the Lisa bonus that way?

Although,  if my maths is correct then £7500 is the most you could loose from the Lisa anyway?

Another option, if you have most of the cash anyway, presumably your finances are pretty good and you could get a personal loan for the extra required and leave the Lisa for retirement savings.

dimbo61

You could also look at Offset mortgages.
Barclays and YBS Offset mortgages allow you to fully offset all the mortgage debt !
So you make a normal mortgage payment each month but pay NO Interest.
You can use your LISA,s to help buy the property and your savings to fully offset the mortgage debt.
You might have some mortgage set up fees to pay and it's at a higher rate ( not so important if your fully offset )