LISA interest over and above deposit amount

Myci85

I've tried to find out the answer to this question, but can't find anything so wondering if anyone has any experience of this please. 

I have a gov LISA account in which I have been saving our house deposit as FTB. We have accrued a few hundred pounds in interest now, and I am just wondering what happens with that interest money, if that is above the amount needed for our deposit? We are paying a £15k deposit, so if at point of purchase our LISA held £15,400, could our solicitor withdraw it all, use the £15k for the deposit and the extra £400 towards their fees, or would we be penalised on the £400 as it wouldn't form part of the deposit?

Basically I am about to add the final chunk of savings from my normal savings account into the LISA to get this year's bonus, but wondering if I should do the full £4k, or if I should do less so that our total in the LISA doesn't exceed our £15k deposit. 

BarelySentientAI

Surely you would want to use the full amount as deposit and borrow less on the mortgage?  Otherwise you're just choosing to pay extra interest that you didn't have to?

se2020

The Lisa funds can only be used towards the purchase of the house. Either as deposit or completion.
You can not pay the solicitors fees (or stamp duty, new sofa etc) with the Lisa funds.

Either pay a bigger deposit or take a slightly smaller mortgage. 

Or just leave the extra in the Lisa if you plan on carrying on paying into it for pension.  Maybe switch to a S&S Lisa after purchase if that is the case

Myci85

BarelySentientAI said:

Surely you would want to use the full amount as deposit and borrow less on the mortgage?  Otherwise you're just choosing to pay extra interest that you didn't have to?

In theory yes, but we wouldn't know until completion exactly how much would be in there, and I imagine at that point it's too late to change how much we've agreed to borrow. 

se2020

Myci85 said:

BarelySentientAI said:

Surely you would want to use the full amount as deposit and borrow less on the mortgage?  Otherwise you're just choosing to pay extra interest that you didn't have to?

In theory yes, but we wouldn't know until completion exactly how much would be in there, and I imagine at that point it's too late to change how much we've agreed to borrow. 

You will know closely enough. 
Or will at least be able to work it out.
The only thing that will change is, if the purchase takes longer than expected, you will have a few £ extra in interest in the Lisa.

Simply allow for £15,500 as deposit funds then if you only have £15,400 make up the other £100 yourself. If it takes a few months and you end up with £15,450 in the Lisa just add the £50 yourself.

If you want to work on the worst-case scenario, Base it on how long your mortgage offer is valid for.
Ie, what the Lisa balance will be in 6mths time

Charismaticpug717

I'm in the same position now - only by a couple of hundred ££ - so wouldn't make much of a difference (if any) to mortgage, but would come in really handy for fees etc. Did the difference have to stay in the LISA? Hope the move went okay!

Albermarle

Charismaticpug717 said:

I'm in the same position now - only by a couple of hundred ££ - so wouldn't make much of a difference (if any) to mortgage, but would come in really handy for fees etc. Did the difference have to stay in the LISA? Hope the move went okay!

As the thread is 6 months, you probably need to tag the OP, as so 
@Myci85

Myci85

Charismaticpug717 said:

I'm in the same position now - only by a couple of hundred ££ - so wouldn't make much of a difference (if any) to mortgage, but would come in really handy for fees etc. Did the difference have to stay in the LISA? Hope the move went okay!

In the end I calculated roughly what the interest would be and made my final payment into the LISA for slightly less than planned so that including the interest there was about £15k total in there (I think it was like £25 short). I then used the money I didn't pay in for fees.