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What is a Lifetime ISA?

A Lifetime ISA (LISA) is a tax-free savings account, where the funds can be used to purchase your first home or save for later in life.

The Lifetime ISA has many advantages, the main being that what you manage to save in a year, the government will top your savings up by 25%.

For example, if you manage to save a maximum of £4,000, your Lifetime ISA will be topped up by £1,000 (25%).

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How does the Lifetime ISA work?

The first step is to open your Lifetime ISA and start saving towards your dream home!

Depending on your Lifetime ISA provider, your 25% government bonus will be added to your savings account in different ways. Some Lifetime ISA providers distribute the 25% bonus every tax year (March-April), monthly, weekly or whenever you contribute to your Lifetime ISA savings.

You must also be aware of the consequences of withdrawing from your Lifetime ISA. If you take money out of the account, you will be charged a 25% withdrawal fee (not applicable at the point of home purchase). For example, if you take out £125, you will receive £100.

As a mortgage broker, we only recommend contributing to what you can afford.

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How do I use my Lifetime ISA to buy a house?

So, you have been building up your Lifetime ISA savings and are ready to start your mortgage process, where do you start?

Your first step is to find your dream home and get ready to make an offer on the property. Once you have an offer accepted, simply reach out to your Lifetime ISA provider to release your savings.

Meanwhile, it’s a great idea to chat with a mortgage broker. Their job is to assist you in finding the perfect mortgage for the property you’re eyeing, especially since you’ll be purchasing it with your Lifetime ISA.

Once your mortgage agreement is finalised, your Lifetime ISA provider can seamlessly transfer your funds to the conveyancers and solicitors. The leftover balance in your Lifetime ISA will then be put towards your mortgage deposit on your dream home!

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Lifetime ISA FAQs

What is the criteria for a Lifetime ISA?

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The Lifetime ISA provides a simple solution for first time buyers looking to get onto the property ladder. Before you can access this advantageous government-led scheme, you must first meet the criteria of the scheme:

  • You must be aged between 18 and 39 years old. You can build up your savings up to the age of 50.
  • You must live in the United Kingdom.
  • Your Lifetime ISA can only be used to buy your first home or as savings for later in life.
  • The value of the property you are planning to purchase cannot exceed £450,000.
  • Your Lifetime ISA must be open for at least 12 months before you can use the funds to buy your first home.
  • The purchase must be with a mortgage.
  • You must use a conveyancer and solicitor to act for you in the purchase.

Our mortgage advisors would love to answer all of your Lifetime ISA mortgage questions. Simply get in touch by booking a free mortgage appointment online or by giving us a call!

Can I withdraw from my Lifetime ISA?

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While it is possible to make withdrawals from your Lifetime ISA, it is typically advised against.

Withdrawals from your Lifetime ISA incur a penalty of 25% on the amount being withdrawn. For instance, if you’re considering withdrawing £1,000 from your Lifetime ISA, you’ll be charged £250 (25%).

This penalty is imposed because the government give you a 25% bonus to help you buy your first home, and withdrawing funds for any other purposes is not using the scheme for its intended benefit.

This is why it is advised to only add to your Lifetime ISA when you can afford to. For example, if you have a large financial commitment due within the next month, perhaps holding off adding to your Lifetime ISA that month could be wise. You can always increase your deposit the month after to compensate for not adding as much the month prior.

It is also worth knowing that you can only withdraw for your first home purchase a year after opening your Lifetime ISA.

Is a Lifetime ISA worth getting?

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For first time buyers in the UK, the Lifetime ISA provides a simple and effective way to save for your mortgage deposit.

The main benefit of the Lifetime ISA is the government’s 25% bonus that is added to your savings. With savings capped at £4,000 per year, your 25% bonus can stretch up to £1,000 towards buying your first home.

On top of this great benefit, your savings are tax-free. This allows you to maximise the value of your savings towards buying your first home.

How do I withdraw from my Lifetime ISA for a home purchase?

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Once you are ready to proceed with your property purchase, you need to reach out to your Lifetime ISA provider.

They will release the funds in your account and send them to your conveyancer and solicitor.

Releasing the funds from your Lifetime ISA without contacting your provider or following their guidelines on how to use your savings for a property purchase, you will likely face a 25% withdrawal fee.

Whilst you carry out your property purchase, our mortgage advisors can help you find the most suitable mortgage product for your new home. Make sure to get in touch with us once you have made an offer on a property so that we have plenty of time to prepare your mortgage application.

Who can open a Lifetime ISA?

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You must be between the ages 18-39 to open a Lifetime ISA.

Also, you cannot own a property; the Lifetime ISA can only be used to buy your first property.

How much can I save in a Lifetime ISA each year?

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The maximum that you can save in your Lifetime ISA each year is £4,000. If you manage to reach this total, the government will top up your savings by £1,000 (25%).

If you don’t quite reach the £4,000, the government will still top up your savings by 25% of what you managed to save. For example, if you save £2,500 in the year, the government will top up your savings by £625.

Can I use my Lifetime ISA to buy a house with someone else?

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Yes, you can use your LISA to buy a house with another person. As long as this is the first property you are purchasing, this can be possible.

You also have the option to use both Lifetime ISAs for the purchase.

If you are planning to buy a property with someone who is not a first time buyer and does not own a Lifetime ISA, you can still use your LISA towards the property purchase.

8 Reasons To Choose Us

Open 7 days a week until late

We are available 7 days a week so that you can get in touch with our mortgage advisors at a time that suits you!

Mortgage appointment at no cost to you!

We are paid on results only. Every customer can benefit from a free mortgage appointment with one of our mortgage advisors.

You'll be paired with a dedicated case manager

You will be assigned a dedicated case manager who will help you prepare your mortgage application.

We're on your side, we work for you

We know that buying your first home can be a stressful process, that's why we are here to help you get a mortgage with your Lifetime ISA.

Lifetime ISA advice

Our mortgage advisors are experienced with the government mortgage schemes and will offer solutions that benefit your personal and financial situation.

1000s of potential options

We will try and find you a mortgage product that saves you money. We have access to high street and specialist lenders that work with LISAs.

We'reexperienced and knowledgeable

With over 20 years of experience in the mortgage industry, we aim to deliver mortgage advice that is tailored to your specific circumstances.

Your mortgage advisor will be with you every step of the way!

From getting in touch to picking up your keys, we will be here to support you through your entire mortgage process.

More Lifetime ISA FAQs

What happens if you pay more than £4000 into the Lifetime ISA?

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The maximum that you can save in your Lifetime ISA each year is £4,000, therefore, if you try to deposit more than this amount, your transfers will be cancelled by your Lifetime ISA provider.

Any recurring payments that you have set up will not transfer into your Lifetime ISA savings balance.

If you reach the £4,000 mark before the tax year ends, perhaps utilising a personal savings account could be an option.

Where can I open a Lifetime ISA?

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To open a Lifetime ISA, you will have to head to a provider’s website.

As a mortgage broker, we can help you find a mortgage for the property you are looking to buy, but cannot open a Lifetime ISA for you.

What happens if I decide not to buy a house once I have opened a Lifetime ISA?

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If you decide that you would rather use your LISA to save for later in life, you can leave the funds in your account and continue saving.

You have up to the age of 50 to contribute to your Lifetime ISA. From age 50, you cannot withdraw from the Lifetime ISA without facing a 25% withdrawal charge.

If you wait until you are 60, you can withdraw the full LISA amount without facing any charges.

When is the Lifetime ISA bonus paid out?

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The way that the Lifetime ISA bonus is added to your account changes depending on your LISA provider.

LISA providers may pay out the bonus each month, per week or upon each deposit. In some cases, it may also be done yearly.

Is Help to Buy ISA and Lifetime ISA the same thing?

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The Help to Buy ISA was discontinued in November 2019. This scheme had unique benefits and worked differently from the Lifetime ISA.

For those who opened a Help to Buy ISA before November 2019, you can continue to save in this account until November 2029.

The Lifetime ISA was introduced in 2017 and is seen by many as a modern, fresher approach to the Help to Buy ISA.

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