Focus On: Lifetime ISAs
1 November 2022
The use of Lifetime ISAs is becoming increasingly popular for first-time buyers aged between 18-40. The below information should be helpful for those buyers who wish to use a Lifetime ISA towards the purchase of their first home.
What is the benefit of a Lifetime ISA?
The main selling point of a Lifetime ISA is the 25% bonus paid by the Government on the purchase of your first home.
What criteria must be met to use a Lifetime ISA towards the purchase of my first home?
- The Lifetime ISA holder must be a first-time buyer and not hold or have held any interest in another property. A co-purchaser does not have to be a first-time buyer, however, should you and any co-purchaser both meet the requirements, you can each use your own Lifetime ISAs and claim the bonus towards the same property;
- The property being purchased must be your main residence;
- You are obtaining a mortgage;
- The purchase price is £450,000 or less; and
- Your first saving into the Lifetime ISA account was more than 12 months ago.
What is the difference between a Lifetime ISA and a Help to Buy ISA?
The higher threshold of £450,000 – in comparison with the Help to Buy ISA scheme which currently only allows a maximum property price of £250,000 – may encourage many first-time buyers to open a Lifetime ISA savings account. Similarly, you can save up to £4,000 per year in a Lifetime ISA which is significantly higher than the Help to Buy limit of £2,400. As of November 2019, you can no longer open a Help to Buy ISA account which has hugely increased the popularity of Lifetime ISAs.
How do I withdraw money from my Lifetime ISA?
There are various ISA providers, each of which has their own processes for withdrawing money towards a property purchase. Some Lifetime ISA providers have a turnaround time of 30 days for funds to be transferred to your solicitor. It is important to let your solicitor know at the outset of the transaction if you intend on using a Lifetime ISA.
You must contact your provider to obtain the required forms ahead of withdrawing the funds from your Lifetime ISA. Usually, both you and your solicitor will need to sign declarations outlining the sum to be withdrawn and to confirm you meet the eligibility criteria. You can withdraw as much as you wish from your Lifetime ISA and are not required to close the account on the purchase of your first home, meaning you can continue to save. It is worth speaking with your provider regarding your options ahead of completion.
On receipt of the declarations, your ISA provider will forward the requested funds together with any bonus due to your solicitor ahead of completion which must legally take place within 90 days of the withdrawal. An extension can be requested for any delay incurred with a new build home.
Drawdown of both Lifetime ISA and Help to Buy ISA funds are included in our fixed professional fees at MKB Law. Please contact a member of the residential property team for more information.