Can I use a LISA to buy a house with someone else?

If my brother has a Lifetime ISA, can he use the funds in the following scenario? My mum owns a house and is buying out her ex-husband (house is currently mortgage free). My brother (who has the LISA) is a First Time Buyer and wants to go on the mortgage with mum to be able to help buy out her ex-husband.

My brother currently lives in the house and will continue to do so. My brother wants to use his LISA funds as part of the buyout funds and they are borrowing the rest via a mortgage. Is this possible as he will be using the funds to go on the mortgage deeds/mortgage and he will be buying a stake in the property? Thank you.

Ah the LISA. A political orphan from George Osbourne’s cupboard of magic tricks. There is an alternative reality in which BREXIT never happened and George Osbourne solved the UK fiscal deficit by making our pension system work like a LISA. There are monorails everywhere and all the buildings look like variations of the Shard. It might only exist in his head though.

As it is, the LISA has become an unfortunate orphan of our savings framework. It causes people quite a lot of heartache as a result. Worst of all it is hard to get good advice because the sums are typically quite low and the people who qualify (under 40s) aren’t well served by the financial planning sector.

With all that said, your brother should be able to do this. The total purchase price of the property must be under £450,000. To be really clear that means the price if they were buying the whole thing from the ex-husband – not just his portion. I feel like this could catch people out in this situation. They are taking out a mortgage, which is a requirement to use the LISA, so no problem there. Your brother must have held the LISA for a year to use it. I’ll take your word for it that he is a First-Time Buyer™. Tick, tick, tick, tick!

On a more administrative note, make sure the money is paid by the provider of the LISA directly to a solicitor’s account. If you take the money out to your own bank account the 25% penalty will be applied.

The complicated bit is that he is buying a property with someone else who already owns a portion of the property and is therefore not a First Time Buyer™. I spent a bit of time making sure this was ok and it is. But because LISAs are unloved by the government, the product providers and the holders you sometimes get weird (read ‘wrong’) answers from product providers. Quoting HMRC guidance and legislation can be helpful in ‘computer says no’ situations so I include a couple of links in my answer here:

This is a link to technical guidance from HMRC for conveyancers. This is the killer quote:

“Lifetime ISA investors can purchase a property as a joint owner with a person who already owns the property, but this is also subject to the conditions of the Lifetime ISA being satisfied".

I’m imagining the ‘mic drop’ moment when you quote this at a recalcitrant provider with great satisfaction... I need to get out more.

Guidance from a government body not sufficient? Well let’s look at some legislation:

The Individual Savings Account Regulations 1998 – you will have to click ‘CTRL-F’ and type in part of the quote to find it. This is the part of the older ISA legislation that was altered to facilitate the Lifetime ISA. The killer quote here is here “The account investor must be purchasing as sole owner or as joint owner with another individual who may already own the property".

In other words, this can be done. You might get told ‘no’ initially by the LISA provider but keep pushing.

Best of luck with it all.