LISA deposit for house purchase

wtiasa1997

My daughter and her boyfriend are in the process of buying their first home together and have had an offer accepted. They are both first time buyers and each have a LISA with the same building society (Skipton.) The combined value of savings in their LISAs is currently £25,000 and as their entry date to the new house is not until September, they would have scope to put further funds into their LISAs in a few days time once the new tax year starts.

The house they are buying is in Scotland. The valuation of the house as per the Home Report is £160,000 and the accepted offer from my daughter and her boyfriend was £164,000. Therefore they are paying £4,000 above the Home Report valuation price. 

Based on their incomes, they have been accepted for a mortgage in principle up to £255,000 and therefore the house they are buying is well within this. 

Ideally they would like to pay a further £4,000 each into their respective LISAs on 6th April and then receive the Government 25% bonus on top of this before the final completion funds are required in September. This would give them total LISA combined savings of £35,000 to use as a deposit.  

As they are paying £4,000 above the Home Report price, they have asked the Skipton if the full intended LISA funds of £35,000 can be used as a deposit against the purchase price of £164,000 which would then leave them needing a mortgage of £129,000. The initial answer from the Skipton was no, they can only use the LISA funds as a deposit up to the value of the house and any additional money they have paid (ie £4,000) over and above the valuation would have to come from other savings and not from their LISAs. When my daughter and her boyfriend queried this, the Skipton then said that they weren't sure and would have to check it out - this was weeks ago & they still haven't come back with a definitive answer one way or another. 

The solicitor acting for my daughter and her boyfriend doesn't know the answer either and says it is a matter for the Skipton to decide on. I have read the HMRC LISA guidance for using the funds towards your first home purchase and I can't see anything in there that would preclude using the full LISA funds against the total purchase price for the house as opposed to only be able to use them against what the house is valued at. 

Therefore, the question is based on a purchase price of £164,000 and a valuation price of £160,000 can any LISA funds be used in full as a deposit against the £164,000 purchase price (with the balance being met by a mortgage,) or can any LISA funds only be used as a deposit against the valuation price of £160,000 (which in effect would mean that the mortgage would be £125,000 rather than £129,000 after the £35,000 LISA savings were used as a deposit and the £4,000 difference would have to be funded by my daughter and her boyfriend from non-LISA savings from elsewhere?)  

se2020

For these purposes (at least in England) the "value " of the house is the price actually paid,  ie £164k
No idea how ir works in Scotland. 

Check the solicitors know about the Lisa's as they need to request the funds from Skipton rather than your daughter withdraw it.

The Lisa can be used for exchange deposit or completion or both.
Ie, they could take £16k from one (or £8k from each)  to use as a 10% exchange deposit then the rest on completion.  If the solicitors are charging for doing that then it might save a bit by paying a £35k exchange deposit. 

The only issue you might have is the mortgage company refusing to lend above valuation so the 'extra' £4k from the Lisa might not count towards the mortgage deposit meaning they might get rates based on a 15% deposit rather than a 20% for example although the way things are at the I'd guess they'll be remortgaging in a year or so anyway. 

Also,  there will be some interest on the Lisa accounts as well so there should be a little bit more than £35k. It's only paying 2.3% but might be worth leaving as much as you can in there but the rules do say that you are only allowed 90 days between exchange and completion. 

Might also be worth leaving £1 in each Lisa to keep them open as they can carry on paying in £4k a year (with a £1k bonus up until the ages of 50. Although a Lisa is not generally regarded as a good option for long-term savings, for the sake of a £ might be worth having as things can change..