If you’re saving up for your first home did you know you could boost your deposit by thousands of pounds by saving into a Lifetime ISA? But who can get one and how do they work? Read on to find out…
What is a Lifetime ISA?
Lifetime ISAs (LISAs) can be opened by anyone aged 18-39 and you can put in up to £4,000 each year into your Lifetime ISA until you’re 50 towards buying your first home or for your retirement. And the Government will give you a 25% bonus on your savings, up to a maximum of £1,000 a year.
But unlike Help to Buy ISAs, which are now closed to new applicants, you don’t need to make regular payments. So you can pay in a lump sum if you want to. And as it's an ISA (an Individual Savings Account) any interest or investment growth will be tax-free.
So what do I need to know if I want to use LISA savings to buy my first home?
So it’s free money, what’s not to like? Well it’s not quite as simple as that because there are some things you’ll need to consider carefully:
1. You must be a first time buyer
If you want to use your LISA savings towards buying a property you must not have owned property before. This even includes things like if you’ve inherited a share of a property.
2. There's a Lifetime ISA house price limit
Also in order to use your Lifetime ISA to help you get on the housing ladder the property you buy must cost £450,000 or less.
3. Your Lifetime ISA must have been open for a year or more
If you want to put your LISA savings towards buying a home it must have been open for at least a year. So if you’re planning to buy a house within the year and you haven’t opened a Lifetime ISA yet you won’t be able to use this scheme to buy your first home.
4. You can double up
And if you’re buying as a couple you can both save into Lifetime ISAs and put your both your savings towards buying a property as long as you’re both first-time buyers.
5. But you could face penalties
However if you save into a Lifetime ISA because you want to put it towards your first home and it turns out you can’t, for example, if the property you’re buying costs more than £450,000, you’ll pay a penalty if you withdraw some or all of the cash if you’re under 60 years old. (Although this doesn’t apply if you’re terminally ill or you die). To avoid paying the penalty you’ll have to wait until you’re 60 before you touch your savings. So you’ll need to think it through carefully before committing.
Can I use a Lifetime ISA if I’m buying through the Help to Buy Equity Loan Scheme?
Yes. You can use LISA savings with other government schemes like Shared Ownership too.
How to use your LISA savings
And once you’re in a position to buy your first home it’s time to get expert mortgage advice.
Our team of advisers will help you find the right mortgage using your Lifetime ISA savings as part of your deposit. So contact us today to find out more about getting a mortgage with LISA savings.