FTB with LISA but don't need a mortgage

ach45

I am self-employed and in my mid-40s. I have a LISA with a balance of £20k. My parents have offered to gift me enough capital to buy my first house outright. I therefore don't need a mortgage but I'll pay a 25% penalty if I withdraw the funds from the LISA. What is my best course of action? Taking out a mortgage feels like an unnecessary complication, but it galls me to lose the FTB bonus.

RogerPensionGuy

Just another crazy rule with a LISA that needs a mortgage to buy 1st property.

Maybe get a very very cheap to process mortgage, maybe it can be repaid quickly with no charge, maybe an offset mortgage again low cost to process mortgage,

Or maybe just buy the house and leave and possibly top up LISA the next 15odd years. 

ach45

Thanks for your reply, RogerPensionGuy. There is a further complication in that I am on a low income and have recently transitioned from Tax Credits to UC. If I hold on to the LISA I will have savings of over £16k so I won't be eligible for UC at all (although weirdly it's fine to own a house outright). This will hugely affect my day-to-day finances as I only work part time and have two small children. We currently rely on the benefits to top up household income and while we will obviously be better off because we won't be paying rent, the loss of UC would still be significant.

masonic

It's only a 6.25% net loss to remove the money from the LISA and use it to pay for the property without mortgage. You would only need to take enough funds to reduce it to a level that is compatible with your UC. Given the amazing opportunity to invest the money in bricks and mortar and avoid the UC complications, this seems a very minor downside. The alternative is to get a mortgage using the LISA as already suggested. The cost of this could leave you with more money than withdrawing with penalty, and your parents could instead help you pay off the mortgage, but it is more hassle and perhaps you'll struggle with a low income (perhaps parents would need to be guarantors).