Buying a Share of Partner's House using Lifetime ISA

Liv_to_Leeds

Hi,

I am in a position where I've gotten conflicting advice in recent weeks, and would like to gain some definitive input if possible.

I have recently gotten married to my partner and am in the process of moving in full time with her, rather than spreading my time at both ends of the M62, which is far from ideal.

She has had a mortgage on the house for a while and owns over half of it based on a recent valuation.

I am a first time buyer, and before my circumstances changed, had been paying into a LISA. I have not paid into it this tax year due to my query below...

I have made contact with a solicitor who has advised me (albeit pre-instruction) that they will be able to ensure I receive the bonus on the LISA regardless of the fact my wife is a homeowner already. Is this correct? Classic 'friend of a friend' situation, but I had previously been told this wouldn't be possible.

Additionally, I have some further available cash that we were going to use to pay off a lump sum of the mortgage in addition to using the LISA. However, would it be advantageous to pay in another £4k to the LISA, wait for the bonus, and then gain additional bonus? Or does that money also fall under the 'has to be open a year' rule?

What I absolutely don't want to do is literally throw money away by paying an additional sum into the LISA whilst misinformed and end up paying a bigger penalty than I needed to.

TIA.

eskbanker

Liv_to_Leeds said:

I have made contact with a solicitor who has advised me (albeit pre-instruction) that they will be able to ensure I receive the bonus on the LISA regardless of the fact my wife is a homeowner already. Is this correct? Classic 'friend of a friend' situation, but I had previously been told this wouldn't be possible.

The solicitor is correct, you're still regarded as a first time buyer here.

Liv_to_Leeds said:

Additionally, I have some further available cash that we were going to use to pay off a lump sum of the mortgage in addition to using the LISA. However, would it be advantageous to pay in another £4k to the LISA, wait for the bonus, and then gain additional bonus? Or does that money also fall under the 'has to be open a year' rule?

Penalty-free use of a LISA towards a first time purchase depends on it being a year since opening the LISA itself, but it doesn't have to be a year from each contribution so you can pay more in and benefit from the bonus within a couple of months.

julianv

You should definitely be able to use your LISA, but bear in mind the rules:
- max £450k for your share
- must use a conveyancer
- must have a mortgage
- must have had the LISA open 12 months since your 1st deposit.

You’ll also get First Time Buyer stamp duty bonus. FTB stamp duty is a one-time thing it makes sense to buy as much as you can afford, whether it’s the share in your partner’s property or another property.

It’s a bit bonkers we have to have a mortgage to use a LISA. I bought cash (from inheritance) so was unable to use it. But I still keep it open as I can still claim the bonus till I’m 50 and simply merge it with my main ISA then. It’s effectively a 20% compound interest from the govt, so I just bank it.

So even if you can’t use the LISA, it’s a bit of a no-brainer imo to keep open. 

eskbanker

julianv said:

You should definitely be able to use your LISA, but bear in mind the rules:
- max £450k for your share the property value

Fixed that for you....

julianv

eskbanker said:

julianv said:

You should definitely be able to use your LISA, but bear in mind the rules:
- max £450k for your share the property value

Fixed that for you....

Thanks. But another pointless rule.

Liv_to_Leeds

Cracking, so I go ahead and deposit the additional 20% on this year's £4k then? Many thanks.

Albermarle

Liv_to_Leeds said:

Cracking, so I go ahead and deposit the additional 20% on this year's £4k then? Many thanks.

Not sure what you mean exactly.

As said you can/should add another £4K to the LISA now and the 25% bonus will be added in a few weeks. Then you can use all funds in the LISA to make the house purchase.

Albermarle

It’s a bit bonkers we have to have a mortgage to use a LISA. I bought cash (from inheritance) so was unable to use it. But I still keep it open as I can still claim the bonus till I’m 50 and simply merge it with my main ISA then.

I  don't think you can merge a LISA with a normal ISA. The LISA has an earliest withdrawal date of your 60th birthday.

Also if using a LISA for retirement purposes and assuming you are some years away from then, it is better to be invested in a Stocks and shares LISA, than a Cash LISA. The reason being is that the S&S LISA is much more likely to beat inflation than a cash one, over the long term.

Liv_to_Leeds

Albermarle said:

Liv_to_Leeds said:

Cracking, so I go ahead and deposit the additional 20% on this year's £4k then? Many thanks.

Not sure what you mean exactly.

As said you can/should add another £4K to the LISA now and the 25% bonus will be added in a few weeks. Then you can use all funds in the LISA to make the house purchase.

Ha, yes I did phrase it clumsily didn't I. You deciphered perfectly though, merci beaucoup.

eskbanker

julianv said:

It’s a bit bonkers we have to have a mortgage to use a LISA. I bought cash (from inheritance) so was unable to use it. But I still keep it open as I can still claim the bonus till I’m 50 and simply merge it with my main ISA then. It’s effectively a 20% compound interest from the govt, so I just bank it.

So even if you can’t use the LISA, it’s a bit of a no-brainer imo to keep open. 

As @Albermarle highlights above, LISA money isn't accessible penalty-free (for property owners) until reaching 60, either for withdrawal or transfer into other types of ISA.

I don't understand what you mean about "20% compound interest from the govt" either, as there is no compounding of the 25% bonuses, they're just one-offs for each contribution, i.e. once you've received the bonus on a contribution, you don't get any more government money for that deposit, although would earn actual interest on it from the LISA provider.