Mortgage question
Can I use my Lifetime ISA on a house over £450,000?
No — the Lifetime ISA property price cap is a hard £450,000 nationwide. It has not moved since LISAs launched in April 2017, and it is not London-weighted. If you use your LISA on a home that costs £450,001 or more you pay the 25% unauthorised-withdrawal charge, which wipes out the government bonus and takes roughly 6.25% of your own contributions with it. In short: find a cheaper home, wait until you are 60, or accept the hit.
Why the £450,000 cap is a cliff edge — not a taper
The cap is binary. Buy at £449,999 and your LISA funds are released penalty-free, complete with the 25% bonus. Buy at £450,001 and the entire pot becomes an unauthorised withdrawal. There is no tapering, no regional uplift, no first-time buyer override. This has been the case since 6 April 2017 and the government has confirmed — as recently as the Autumn Budget 2025 — that the cap stays frozen until the LISA is replaced.
What counts as the “price”? The full purchase price of the property, including any premium you are paying the seller for fixtures, fittings, or a linked purchase. It does not include stamp duty, legal fees, or mortgage arrangement fees — only the price on the contract. If you are buying a shared-ownership home, the relevant figure is the full 100% market value, not the share you’re acquiring, which makes LISA use very restrictive in London.
What the 25% penalty costs in pounds and pence
The penalty is applied to the total amount you withdraw — your own contributions plus the bonus plus any growth. Because the 25% bonus was added to get you to the pot in the first place, the 25% penalty coming back out takes more than just the bonus: it clips an extra slice of your own money.
| You paid in | Government bonus (25%) | LISA value | Penalty (25%) | You receive | Real cost vs your own money |
|---|---|---|---|---|---|
| £4,000 | £1,000 | £5,000 | £1,250 | £3,750 | £250 loss (6.25%) |
| £10,000 | £2,500 | £12,500 | £3,125 | £9,375 | £625 loss (6.25%) |
| £20,000 | £5,000 | £25,000 | £6,250 | £18,750 | £1,250 loss (6.25%) |
Growth matters too. If your LISA has grown through investment, the penalty is levied on the full pot including gains, which can take the effective loss above 6.25%.
What happens if the price creeps up between exchange and completion?
This trips buyers up more often than you’d think. You exchange on a £448,000 house and then agree a late variation with the seller — maybe extra carpets, maybe the kitchen appliances at £3,000 — pushing the final price to £451,000. HMRC looks at the price on completion, not at exchange. Your LISA withdrawal is now unauthorised and your solicitor should refuse to release the funds without warning you.
If you’re close to the cap, talk to your conveyancer before varying the contract. Pay for fixtures outside the transaction where possible, and avoid linked purchases that could push you over.
Options if your target home is above £450,000
- Buy below the cap and use the LISA as deposit. Often the best outcome, especially outside London and the South East where plenty of family homes sit in the £380–£450k range.
- Use a partner’s funds for the top-up. If only one of you has a LISA, the other can contribute non-LISA savings so the LISA bit is used within the £450k limit — but remember both buyers must be first-time buyers for the LISA to release penalty-free at all.
- Withdraw and accept the 25% hit. Sometimes the maths still works: £20,000 LISA → £18,750 in hand is better than the cost of buying a less suitable property.
- Keep it for retirement. From age 60 onwards the pot (bonus and growth) pays out tax-free.
Run your numbers through our LISA vs regular savings calculator before you commit. You can also read our companion guide on how the 25% penalty works in detail.
What about the 2028 First-Time Buyer ISA?
The 2025 Mansion House speech floated replacing the LISA with a “First-Time Buyer ISA” in April 2028, potentially without the 25% clawback and possibly with a higher property cap. As of April 2026 this is not yet legislated — treat it as a planning rumour, not a rule. If it does come in, existing LISAs are expected to be protected or transferable, but that detail has not been confirmed.
Common misconception: “The cap must be higher in London”
It isn’t. The First Homes scheme has a £420,000 London cap. The Freedom to Buy scheme has a £600,000 maximum loan. But the LISA has one nationwide cap of £450,000, and it has survived multiple London price increases without budging. If you live in Zone 1–3 and are saving into a LISA, plan around that cap — or plan to use the money at 60.
This is information, not regulated financial advice. Talk to an independent adviser about whether a LISA fits your plans.
Sources
Information, not regulated advice. Mortgage Notes is not an FCA-authorised mortgage adviser. For a recommendation on your specific circumstances, speak to an FCA-authorised broker.