If you’re looking for a way to save as much money as possible for a deposit on a house, then you might want to keep reading and find out about the Lifetime ISA…
What is the Lifetime ISA?
You can pay up to £4,000 each year into your ISA account and receive a 25% bonus (£1,000 maximum) for free from the government - who doesn’t like the sound of a free £1,000?
Who is it for?
This one is quite simple. Anyone can open a Lifetime ISA, as long as you’re over 18 years old and under 40 - although you can keep paying into the account until you’re 50. Once you turn 50, you can still keep the account open, you just won’t be able to pay into it anymore.
What are the advantages?
Aside from getting a free 25% bonus…
- If you’re saving with another person, and you each have your own separate Lifetime ISAs, then between you, you could receive a significant bonus which could be a decent deposit on a house in a few years’ time
- You earn interest on your savings as it’s an ISA (Individual Savings Account)
Anything else worth knowing?
- To get the 25% bonus, you need to have had the account open for at least 12 months
- If you’re a first time buyer, you must be buying a residential UK property worth £450,000 or less
- You can only withdraw the money if you’re over 60, using the money to buy your first home, or you have a terminal illness with less than 12 months to live. If you withdraw the money for any other reason then you’ll have to pay a 25% penalty. This means you’d lose the government bonus, and more, as you could get back less than what you put in
- There are various institutions offering Lifetime ISAs, including some building societies
As you need to have the account open for at least 12 months, this is a long-term savings account. If you’re in a hurry to quickly buy your first house, and will want access to the money within a year, this might not be the right route for you to take. However, if house prices become more affordable during this time, then waiting for 12 months might not be such a bad thing.
Already have a Help to Buy ISA?
The Help to Buy ISA has now closed, but if you already have an account open, that’s fine. You can keep saving into it until November 2029 when all accounts will close, and you must claim your bonus before November 2030.
If you currently have a Help to Buy ISA, you can transfer your funds into a Lifetime ISA.
To find out more about Lifetime ISAs, get in touch with our team of expert mortgage advisers.
Read our article ‘Busting the myth of the big deposit’ to find out more about getting over the hurdle of saving for your deposit or visit our 'Getting a mortgage' page that has all the information you might need to get started.
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