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How to use a lifetime ISA to buy your first home

September 2022

Lifetime ISAs give you a 25% government bonus on top of your savings to help you buy your first home or save for retirement.

This makes it a great option for those with clear savings goals. However, buying a house can be a complicated and lengthy process, so how does your lifetime ISA fit in?

What is a lifetime ISA?

A lifetime ISA is a savings account made to help you either buy your first home or save up for retirement. If either of those fit your savings goals, then the government will give you a 25% bonus on top of your lifetime ISA savings to help you get there – for example, if you have £4,000 in a lifetime ISA the government will add £1,000 on top.

You can open a lifetime ISA if you’re anywhere between the ages of 18 and 39 and you can pay into it until the age of 50. You can choose between a cash lifetime ISA or a stocks and shares lifetime ISA. You can put up to £4,000 each tax year into a lifetime ISA.

If you don’t use your lifetime ISA savings to buy your first home or boost your retirement, you’ll have to pay a withdrawal charge of 25% on the total amount you take out.

Using a lifetime ISA to buy your first home

Buying a property can be a long and confusing process, especially if it’s your first time. When it comes to using your lifetime ISA savings to help you buy your first home, there are systems in place to make sure your money goes to the right place. Don’t panic, your conveyancer will know how to use a lifetime ISA and will tell you everything that you need to do.

Hiring a conveyancer

A conveyancer is a legal professional who specialises in the process of buying and selling property.

You should hire a licensed conveyancer or a conveyancing solicitor when you’ve had your offer accepted. The role of a conveyancer is to make sure all legal processes of buying the home go smoothly and that your rights are protected the whole way through.

They’ll also make sure the money in your lifetime ISA comes out of your account at the right time and goes where it should – you don’t need to worry about moving this money and notifying HMRC yourself.

Withdrawing from your lifetime ISA

Once you’ve had your offer accepted, your conveyancer will send some forms to fill out. At this point, you’ll let them know that you plan to use a lifetime ISA to pay for all or part of your deposit.

They will reach out to your lifetime ISA provider on your behalf. Your provider will get in touch with you to make sure everything is correct, before then checking with HMRC if your conveyancer is properly registered and if your account qualifies.

As long as everything looks good, your provider will transfer your conveyancer the amount you need from your lifetime ISA, including the 25% government bonus, when you complete your home purchase.

In the meantime, your solicitor will carry out searches and get all the paperwork ready for you buying the property. You can keep putting money into your lifetime ISA during this time.

Frequently asked questions about using lifetime ISAs

Your conveyancer will let your lifetime ISA provider know the purchase went through and you’re now a homeowner. Your provider will mark the process as complete on their system and notify HMRC.

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 up for your retirement – and you’ll still get that 25% government bonus on everything you put in.

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Most importantly: get started

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. OneFamily's Lifetime ISA is a stocks and shares product, which means your money is invested in the stock market. While there is good potential for it to therefore grow in the long-term, there is a risk you could lose money.

Not yet sure if now’s the time? Sign up to receive our lifetime ISA guide by email using the form on this page to find out more about this savings shortcut.

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