Have a Lifetime ISA or used one towards your first home? We want to hear about your experiences

Former_MSE_Emily_W

A Lifetime ISA (LISA) can be opened by anyone aged between 18 and 39. You can save up to £4,000 a year in it, towards your first home or retirement, and the state adds a cash bonus of up to £1,000 a year on top.

If you’re planning to use your LISA towards your first home, you must be buying a residential UK property to live in that costs £450,000 or less. You'll face a 25% penalty if you withdraw the cash and don't use it for a first home under that limit, or for retirement – not only removing the government bonus, but also losing the equivalent of just over 6% of what you originally saved. See MSE’s Top Lifetime ISAs guide for more info.

We want to hear from you if you’re planning to use a LISA towards your first home, or already have done…

• How have you found your overall experience of saving into, or using, your LISA?
• Have you found that the £450,000 property limit is high enough for your needs, or is it too low? How has this impacted you?
• Are there any changes that could make the LISA work better for you? What, if anything, would you improve about it?

Let us know below or email us at campaigns@moneysavingexpert.com

JohnTheSkier

I've recently exchanged and due to complete on 25th November using a LISA. Moved it a few times to get a slightly better rate and ended up at Nottingham Building Society, which they then siphoned into Beehive. All has gone very smoothly - bonuses always paid within 6-7 weeks of paying in, solicitor was able to access the funds very easily to use for the exchange deposit. The only slight annoyance is that they weren't able to close the account completely, meaning I will have a small amount of interest left in there that I will have to pay a penalty if I want to withdraw before retirement.

Would be better if they did reduce the penalty to 20% so as not to penalise people who need to access the funds.

alibean121

I used my LISA to buy my first home in September. I've had the LISA open since 2018 and transferred my H2B ISA in at that time. Total value was approaching £30k including nearly £6k of bonus. Having that extra deposit money did make a big difference to my purchase

The main issue for me was the potential penalty. When I first opened the account, I didn't earn a lot and didn't have much spare money. In the second tax year it was open, I wasn't able to fund the account as, I was concerned I would need the money in an emergency. This means I missed out on the bonus for that year. When you're starting to save, it can be very difficult to commit money long-term - I think not getting the bonus would really be penalty enough for withdrawing early from the account.

I also had a slight issue using the account where my solicitor wouldn't allow me to use any funds from the LISA for my exchange deposit. This is clearly allowed by the government but, was against the internal policies of my solicitor which caused some additional stress. On doing some research, seems like this is a common policy. It was an issue for me as almost all my deposit came from the LISA although we were able to get the vendor to agree to a reduced exchange deposit.

Overall the scheme has been a positive for me and I've ended up with a big boost to my deposit. Ideally there would be more choice particularly with more mainstream providers for Cash LISAs as interest rates have never been particularly competitive.

SprostonGreenHead

I'm about to use my LISA valued at ~20k as part of a deposit. Annoyingly I'm having to forfeit 25% of it as the property we found is 475k. It's ridiculous that threshold has not been bumped up. All my bonus and some of my growth (stocks and shares LISA) is being forfeited.

I'll update here on the experience of completion with one when it comes to that. It's a good scheme, but will die a death if they don't review the limit.

JohnTheSkier

SprostonGreenHead said:

I'm about to use my LISA valued at ~20k as part of a deposit. Annoyingly I'm having to forfeit 25% of it as the property we found is 475k. It's ridiculous that threshold has not been bumped up. All my bonus and some of my growth (stocks and shares LISA) is being forfeited.

I'll update here on the experience of completion with one when it comes to that. It's a good scheme, but will die a death if they don't review the limit.

If you can buy a home above the upper limit then there is an argument that you didn't need the support. Perhaps a higher limit is needed, but probably area specific. I do agree however that you shouldn't lose any of the gains - "penalty" should be 20% in order to only claim back the government bonus.

SprostonGreenHead

JohnTheSkier said:

SprostonGreenHead said:

I'm about to use my LISA valued at ~20k as part of a deposit. Annoyingly I'm having to forfeit 25% of it as the property we found is 475k. It's ridiculous that threshold has not been bumped up. All my bonus and some of my growth (stocks and shares LISA) is being forfeited.

I'll update here on the experience of completion with one when it comes to that. It's a good scheme, but will die a death if they don't review the limit.

If you can buy a home above the upper limit then there is an argument that you didn't need the support. Perhaps a higher limit is needed, but probably area specific. I do agree however that you shouldn't lose any of the gains - "penalty" should be 20% in order to only claim back the government bonus.

I begun saving into the Lifetime ISA some 5 years ago when they were first introduced and I definitely felt I needed the support at the time. Had we been able to find a house which met our needs under the threshold, we'd have preferred it, but prices in that region have risen >20% in the last two years alone. If we didn't have a mortgage offer already agreed at a decent rate, then on today's rates, we couldn't afford this property. Agreed, forfeiting just the bonus would be acceptable, though I still feel this threshold should have been rising with market prices since it was introduced. Would be sods law if they bumped it up in Apr '23!

silvercar

DS1 bought a 2 bedroom flat in London, border of zones 2&3. He had HTB ISA, but didn’t do a LISA because the limit was too low. The London limit would only have got home a 1 bed place and he wanted somewhere that would be big enough for a few years minimum 

Perksy5

Used my LISA back in 2019. My conveyancer was amazing and the process was so easy. I had a cash LISA with Skipton if it matters.
My balance in my LISA ended up being more than my deposit (5% deposit) so once the account was closed and completion finalised they returned the surplus and went towards new furniture. Can't recommend LISAs enough.

MSE_Helen_K

Hi everyone, thanks so much for all of your feedback on the Lifetime ISA. We've today launched an MSE campaign on it.

For the short read, see our news story here: 
Change needed to help half a million younger people with Lifetime ISAs

For the long read, see our full report here: Locked out by the LISA

If you haven’t already, join the forum to reply.

[Deleted User]

I know this will be a shock to MSE but London isn't the centre of the universe and 450k is definitely enough for a FTB in most locations in the UK and globally. 

Wildsound

I agree, this really is just a London only problem. By MSE's own table of figures, "average" (because below average isn't good enough for some) London house prices in 2017 was £479,790 (above the £450k limit), yet I don't remember hearing people criticising the limit back then.

The penalty should be reduced if you are buying a first home though, I agree on that.