My partner and I are saving for our first house, hoping to benefit from our Lifetime Individual Savings Accounts (Lisas). Would I be able to use my Isa as a deposit on a house in conjunction with my partner’s if only my partner’s name is on the mortgage?
Sarah Coles, personal finance analyst at Hargreaves Lansdown, says the guidance on this was written pretty obliquely, so it’s no wonder you were finding it difficult to get a straight answer. The good news is that HM Revenue & Customs has just put out new guidance which is much clearer. The bad news is that you can’t do what you have planned.
Any individual who uses a Lisa also has to use a mortgage to buy the property, so for both you and your partner to use your Lisas, you would both need to be named on the mortgage.
If you choose to go ahead just using your partner’s Lisa and the mortgage in their name, you may also run into difficulties finding a mortgage company willing to lend to a single individual when there are two of you named on the deeds of the property. They tend to worry about what would happen if your partner didn’t keep paying the mortgage.
From this perspective it’s much more straightforward if you can take the mortgage out together.
The best approach depends on why you had not planned to be named on the mortgage. If you have enough cash not to have to borrow for your half of the property price, you will need to consider whether you are happy to face the risk of being named on the mortgage that your partner is paying. The issue here is that if they have trouble making repayments, this will put you in the frame for them.
It’s also possible that you are concerned about your credit rating. If you have a while until you plan to buy, you can take the opportunity to work your way into a better position. Focus on paying your debts on time, paying down any credit cards you have maxed out, making sure you’re on the electoral register, and keeping new credit requests to a bare minimum. If you’ve made a mistake in the past, time itself will eventually push this off your credit record.
If you are keen to buy more quickly, you can talk to a mortgage broker to see what options are available to you. They can say whether a mortgage is out of the question, or just likely to be more expensive until your credit record improves.
If you can’t get a mortgage at all, your final option may be for your partner to buy alone. Of course, then they may run into issues of affordability, not just in building up the deposit in the first place but also in persuading a mortgage company to lend them everything they need.
Laura Suter, personal finance analyst at AJ Bell, says you’re right to check the restrictions on the Lisa as the last thing you want is to save into the Isa and then be caught out when you come to withdraw the money. This is because any withdrawals from the Lisa that don’t meet the government’s criteria will mean that you currently pay a 20 per cent exit charge on any money you take out, until April next year when it rises to 25 per cent.
One of the criteria of using the Lisa is that when a first-time buyer uses it for a property, the purchase must involve a legal mortgage on the home. This means that cash buyers who don’t need to use a mortgage wouldn’t be able to make use of the Lisa and the government bonus.
In your example there will be a mortgage against the property that your partner is taking out, it just won’t be in your name. However, you would need to both be on the mortgage to both be able to use your Lifetime Isa towards the purchase. If just your partner is on the mortgage then only they would be able to use a Lisa for the purchase, unfortunately you wouldn’t.
If you are able to be on the mortgage, then you could both use your Lisa towards the purchase, as long as you’re both first-time buyers. This means that you can get an extra £2,000 government bonus for every year that you each save £4,000 into a Lisa — which can really boost your savings and shave years off the time it takes to save a deposit.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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