The Lifetime ISA - A Guide for First Time Buyers

Having purchased with a Lifetime ISA herself, Rachael has prepared a summary which may help future buyers.

Firstly, what is a Lifetime ISA?

This is an account designed to help people save for their first home, as well as retirement, but we will be focusing on the first home aspect. This can either be a cash ISA, stocks and shares or a combination of both.

Lifetime ISAs were introduced to replace the Help to Buy ISA, which whilst also providing a 25% top up, had its limitations. They were subject to a maximum purchase price of £250,000 which doesn’t go very far in Horsham, or anywhere else in the south-east for that matter. The Lifetime ISA however, has an increased threshold of £450,000.00. Also, the Help to Buy ISA allowed for monthly contributions of up to £200.00, meaning you would receive a top up of £50.00. The Lifetime ISA allows for a yearly contribution of up to £4,000.00, resulting in the potential to receive a £1,000.00 top up.

It is no longer possible to open a Help to Buy ISA, but if you currently have one, you may wish to consider making the switch and transfer your funds to a Lifetime ISA to benefit from the increased purchase threshold and if you are able to contribute more than £200.00 a month. Speak to your Help to Buy ISA and any Lifetime ISA providers for further information. Rachael and her partner made the switch, and the process was easy.

We are not financial advisers and cannot offer any advice as to the suitability of a certain account to an individual.

What are the limitations for a Lifetime ISA?

• You cannot use funds in a Lifetime ISA for a property purchase until at least 12 months have passed following you making your first payment into the account.

• You must be buying your property with a mortgage from a mainstream lender. Private mortgages from family members for example will prevent you from using the ISA.

• A conveyancer must be acting for you in your purchase, as the Lifetime ISA provider will pay funds into their account rather than transferring funds to you directly.

• You will incur a 25% withdrawal charge if you withdraw funds for any reason outside of the approved circumstances.

• You must be over 18 or under 40 to open a Lifetime ISA, and you can not pay into the account once you turn 50.

If I am buying with someone else who has a Lifetime ISA, can we use both accounts?

Absolutely! Provided you are both first time buyers and meet all required conditions.

How do I access the funds?

Each provider’s process is slightly different, but if we are aware at the time of opening your file that you have a Lifetime ISA, we will ask you who your provider is. We will then look into what they require to get the ball rolling and provide you with this information. This will usually involve you completing a form, either by hand or on a mobile app if your provider offers this, which includes you providing your conveyancer’s details so the provider can make direct contact with them.

From our side, we will then complete our own form and confirm our bank details for payment of your funds. Some providers can process the payment within a week, some may take longer and up to a month. It is therefore important that you notify your conveyancer as early on as possible if you are relying on funds from a Lifetime ISA so waiting for the funds to arrive does not cause delays later on in the conveyancing process for you and other parties.

I’m a first time buyer looking to purchase my first home, can you help?

We would be more than happy to! We act on freehold, leasehold, shared ownership, new builds and auction purchases and have an office right here in Horsham should you wish to arrange an appointment to meet us in person.

If we can be of any assistance please contact us on 01403 613161 or info@carrcobb.co.uk