Lifetime ISA used for first house purchase - need for mortgage

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
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Colin61Colin61 Forumite
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edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
Hi,

i have been saving in a LISA; I hope to buy my first house soon and have about 20% deposit . Due to a family event, my parents are able to formally loan me the balance.

The Gov.uk site stipulates that LISA can only be used when "you’re buying with a mortgage". Does anyone know of any flexibility on this rule?

If not, I'll have to weigh up the costs of a minimum mortgage against the gov LISA top-up.

Replies

  • eskbankereskbanker Forumite
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    My instinct was no, but the HMRC guidance at https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#withdrawals-for-first-time-residential-purchase does suggest some flexibility in stating that a LISA withdrawal can be penalty-free for a first-time property purchase where (my italics):
    the property is purchased with a loan taken as a charge over the property for example a mortgage
  • masonicmasonic Forumite
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    The underlying legislation is fairly clear that a mortgage or equivalent secured loan is required. There is no restriction on how little you borrow or how quickly you pay it off, so you need to weigh up the fees and interest against the size of the bonus you can make use of.
  • edited 30 July 2018 at 8:20PM
    kidmugsykidmugsy Forumite
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    edited 30 July 2018 at 8:20PM
    So if it is a loan from the parents, and they take a charge on the property, use of the LISA seems legit.

    As I understand it, a "mortgage" is the charge on the property that's used to secure the loan - what you pay interest on is the "mortgage loan". Not that I'd expect any precision from HMRC.

    Can I take it that parents can make a mortgage loan to a child without scrutiny by a regulator, demands that they have a banking licence, or suchlike fol-de-rols?
    Free the dunston one next time too.
  • masonicmasonic Forumite
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    kidmugsy wrote: »
    Can I take it that parents can make a mortgage loan to a child without scrutiny by a regulator, demands that they have a banking licence, or suchlike fol-de-rols?
    I looked into this previously and it would appear it would require the parents to be FCA authorised as a moneylender. Plus they would need to get a conveyancer to sign off on the arrangement.
  • WildsoundWildsound Forumite
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    Might be worth getting the lowest mortgage possible, with an option to repay in full without penalty then?
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