How to use a lifetime ISA to buy your first home
When you're ready to buy your first home with your lifetime ISA, we'll send the money directly to your solicitor.
Don't withdraw the money yourself - even if you intend to use it to buy your first home, you'll be charged the government withdrawal charge if it's not withdrawn by your solicitor (unless you've turned 60, when you can withdraw freely).
Here's a step-by-step guide to buying your first home with a lifetime ISA.
Using a lifetime ISA to buy your first home
- Have an offer on a property accepted
- Hire a conveyancing solicitor and let them know you plan to use a lifetime ISA
- Fill out an Investor Declaration Form and send this to your solicitor
- Send your solicitor a Conveyancer Declaration Form for them to complete (they may already have this)
- Your lifetime ISA funds are sent to your solicitor!
What is a lifetime ISA?
A lifetime ISA (also known as a LISA) is a saving or investment account designed to help you either buy your first home or put extra money aside for retirement. The government will add a 25% bonus - up to £1,000 every tax year - to your lifetime ISA savings to help you reach your goal.
You can open a lifetime ISA if you’re a UK resident aged between 18 and 39 (inclusive) and you can pay in up to £4,000 each tax year until you turn 50.
You can take money out at any time, but you should avoid doing so unless you really need to. If you make a withdrawal for anything other than to buy your first home (and you’re under 60), the government will charge you a withdrawal fee. This gives you a good incentive not to dip into your savings if you don't have to.
Buying a home with a lifetime ISA in four steps
There are systems in place to make sure the money in your lifetime ISA goes to the right place when you're ready to buy.
To avoid confusion, here are the four steps to buying your first home with a lifetime ISA.
Step 1: Have an offer on a property accepted
Sounds obvious, but the process of withdrawing money to buy a house can’t start until you’ve had an offer accepted.
Step 2: Hire a conveyancing solicitor
Let your solicitor know you’ll be using a lifetime ISA to pay some, or all, of your mortgage deposit.
Their role is to make sure all legal processes of buying the home go smoothly and that your rights are protected the whole way through, which includes making sure your lifetime ISA money reaches the seller and HMRC are informed.
You don’t need to worry about moving the money or notifying HMRC yourself.
Step 3: Instruct your solicitor to withdraw your lifetime ISA money
Once you’ve had your offer accepted, there will be some paperwork to do.
- You’ll need to complete an Investor Declaration Form and send this back to your solicitor
- Your solicitor will need to complete a Conveyancer Declaration Form
They'll send us both these completed forms and we'll get in touch with you to make sure everything is correct. We'll also contact HMRC to make sure your solicitor is who they say they are, is properly registered and that your account qualifies.
In the meantime, your solicitor will carry out searches and get all the paperwork ready for you to buy the property.
Step 4: Your lifetime ISA money is sent to your solicitor
We'll transfer your conveyancing solicitor the amount you need from your lifetime ISA.
It can take up to six working days for the money to reach your solicitor. Once they've received it, they need to complete the sale within 90 days. For this reason, they'll usually request it when they know the completion date.
Once your sale is complete, your solicitor will let us know the purchase went through and you’re now a homeowner. We'll mark the process as complete on our system and notify HMRC.
You can then keep paying money into your lifetime ISA but, remember, you'll be charged a withdrawal charge if you take that money back out before you turn 60 at least. You won’t be able to use it to buy another property as you’ll no longer be a first-time buyer.
How do I find a conveyancing solicitor?
There are lots of different ways you can find a conveyancing solicitor such as recommendations from family, friends or estate agents, or searching online.
Once you have found a solicitor you’d like to use, make sure you check that they’re a member of the Law Society of England and Wales or the Law Society of Scotland, and that they're a member of the Law Society’s Conveyancing Quality Scheme. They must also be a member of the Council for Licensed Conveyancers.
Can I put my lifetime ISA money towards a house deposit?
Yes, unlike help-to-buy ISAs, lifetime ISAs can be used towards the mortgage deposit for your first home, whether that’s a flat or a house. The conditions are:
- The property must cost £450,000 or less
- You must have some money in your lifetime ISA for at least 12 months before you buy the property
- You must use a conveyancing solicitor to buy the property (the ISA provider will send the money directly to them)
- You must buy the property with a mortgage
- You can't have owned a property before
- The purchase must include ‘legal interest in land’, so you can't use a lifetime ISA to buy a houseboat for example
- It must be a property you intend to live in
If you instruct your solicitor to withdraw money to buy a property without meeting all these conditions, the government will charge you a withdrawal fee on the money you take out. The charge is likely to be bigger than the bonus the government gave you and could leave you with less money then you've paid in.
Do I have to use my lifetime ISA to buy a property?
No, lifetime ISAs are also designed to help you save for life after 60.
If you change your mind about buying a property, you can either take your money out (you will be charged the government withdrawal fee) or leave it where it is until you turn 60 - you can keep adding to it until you turn 50.
The exception to this rule is if the account holder is terminally ill, with fewer than 12 months to live.
Invest in your future with a OneFamily Lifetime ISA
Got £25 in your current account? If you put it in a lifetime ISA now you'll be taking your first big step towards owning your own home.
Even though you’ve used your lifetime ISA to buy your first home, your account isn’t closed, despite it now being empty. You can keep putting money into it until the age of 50 to save extra money for your retirement – and you’ll still get that 25% government bonus on everything you put in.
OneFamily Lifetime ISA
Ready to start saving for your first home?
Our lifetime ISA could help! You'll gain a 25% boost from the government on top of your savings, as well as any potential stocks and shares returns.
More articles for first-time buyers
You may also be interested in:
How to get on the property ladder
Your first home may feel like it will take a long time to save for. But there are ways to get there a little bit sooner.
Saving for retirement when you’re self-employed
As a self-employed person you don’t get automatically enrolled in a workplace pension...
Lifetime ISA allowance
You can put up to £4,000 into your Lifetime ISA every tax year. The more money you put in, the bigger your government bonus will be.
What is a Lifetime ISA?
A Lifetime ISA is an ISA with a government bonus that can help you save for your first home or retirement.