Woman makes £1,000 ISA mistake while trying to buy first home

A woman has warned others not to make the same mistake as her while buying their first home, as she admitted she made a 'rookie error' which risked her missing out on £1,000 of extra money.

When Jayde was buying her first home she was doing it with a Lifetime ISA, but as she explained in a video when her solicitor was telling her it was time to get the ball rolling she didn't have all of her deposit money in the account.

"If I don't put the rest of my deposit money in until the start of the new tax year then I can claim the extra government bonus," she explained as she described her thought process, since she was doing the deal around the time of the new tax year when the Lifetime ISA threshold resets.

"But obviously now I've figured out that because I have requested a house purchase from my Lifetime ISA and I've given them the solicitor's details my account has been frozen.

"So I can't put anything else into my account."

Hoping that others will be able to avoid her mistake, Jayde made sure others knew not to fall into the same trap she had.

Fortunately for Jayde she was able to slow things down a bit and request to get her Lifetime ISA account resumed in the hopes she could bide her time long enough to deposit another £4,000 and get the £1,000 government bonus to kick in.

She had £1,000 of government bonus riding on everything going well, but the bonus takes several weeks to clear and she was warning others of the dangers of doing a deal before making the most out of their Lifetime ISA.

Fortunately for Jayde the risk of missing out on the money wasn't going to scupper her deal, but you try and find someone who'd say no to an extra grand while sorting out the financials of buying their first home.

You take all the help you can get when you're dealing with such high prices.

What is a Lifetime ISA?

Brits who are looking to get their first foot on the property ladder will likely know what a Lifetime ISA is, but for the uninitiated it's a bank account where for every quid you put in the government will stump up a quarter of that amount, up to a limit of £4,000 a year.

Simply put, if you open a Lifetime ISA and max it out for the year by depositing £4,000 then the government will put in £1,000.

You've got to be over 18 and under 40 to open one of these, and you can pay into it until you're 50, after which time you won't be able to add more money or get the government bonus.

It'll still make some money on interest or investments, but since you won't be able to take advantage of the main feature of the account and can only use it for very specific purposes you're best off finding something to spend that money on.

What can you spend Lifetime ISA money on?

The main thing people can buy with their Lifetime ISA savings is their first home, as long as it follows certain rules.

It needs to be your first property, and the purchase price needs to be under £450,000, while you'll also need to be buying it at least 12 months after you opened the account.

You have to use a conveyancer or solicitor to act for you in the deal and you have to get a mortgage on the property.

That mortgage can't be a private one from a relative, someone married or in a civil partnership with a relative, someone you're married to or any of their family.

It also can't be someone who is married to a relative of your spouse.

As long as you meet all of the rules you can buy a house with your Lifetime ISA, and if you're buying with someone else and you both meet the rules then you can both use your accounts to buy a house.

You can also withdraw the money without penalty after you're 60, or if you're terminally ill and have less than 12 months to live.

Trying to take out the money under other circumstances is called an 'unauthorised withdrawal', and means 25 percent of what you take out is taken as a charge to remove the government bonus.