How First Time Buyers can access FREE MONEY!

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How First Time Buyers can access FREE MONEY!

A Lifetime ISA (LISA) is a savings account available to people aged 18-39 into which you can invest £4,000 per year and receive a 25% bonus from the government for every £1 you invest (free money!). They are available to one per person, per tax year.

The savings account – and bonus – can be used to purchase the first home in conjunction with a mortgage, the purchase price of the property cannot be more than £450,000.

A few key features of the LISA is:

  • Between the ages of 18 and 39

  • A UK resident, or a member of the armed forces serving overseas, or their spouse/civil partner

  • Designed to help people aged between 18 and 40 save up for their first home, or retirement.

  • There’s a 25% government charge if you withdraw before age 60 for any reason other than buying your first home or terminal illness.

  • When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus.

Lifetime ISAs are opened by individuals – you cannot open them with someone else. This is the same for all ISAs. If you plan to buy a home with someone else who is also a first-time buyer, you can each open and save money into your own Lifetime ISA account.

You can open more than one Lifetime ISA during your life, but you can only open one per tax year and put money into one per tax year. Each time you apply for a new Lifetime ISA you will still need to meet the eligibility criteria (above) for opening an account.

Every time you deposit into the ISA, the government will automatically match it with another 25%, paid within a month. The great thing is, if your LISA pays you interest on your savings, you can also earn interest on the free money that the government has deposited into your account too! So its worth shopping around for the best interest rate you can get on your LISA.

When you take out your Lifetime ISA money for a property purchase, you can take out the entire amount, including the 25% bonus.

Unfortunately, this “free money” does come with a few restrictions! But nothing to worry most First-Time Buyers. Firstly, the value of the property you are purchase has to be less than £450,000. Secondly, this must be your first ever property purchase in the UK.

However, your parents are allowed to ‘gift’ you money tax-free each year to pay into your Lifetime ISA.

The main difference between a LISA and a Help To Buy ISA is that you can save £4,000 a year in a Lifetime ISA, compared with £2,400 (£3,400 in year one) in a Help to Buy ISA. This could mean a much bigger and quicker bonus when compared to an HTB ISA. Although the Help to Buy ISA does provide a more flexible approach to savings as you can access this without penalty.

If you are thinking of the best way to save, I highly recommend a Lifetime ISA.

If you have savings in a basic e-savings account with the end goal of a house purchase, I recommend moving the savings into a LISA as soon as possible! For example, £4,000 savings moved across to your LISA will mean that £4,000 turns into £5,000 with the government bonus! You could do this once every tax year!

Looking for more great mortgage tips & advice? Check out our last blog post Why Use a Mortgage Broker?

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