If you’re buying your first home or considering doing so soon, you might want to consider a Lifetime ISA (LISA).
It’s not a straightforward account but it many be worth a thought as it can provide a chunk of change towards your new house.
How to get an account
To get an account, you have to be a first-time buyer – someone who has never owned a property anywhere – and be aged between 18 and 40. You can’t have jointly owned a property either or run a company that owned residential property.
You must also be buying a residential UK property to live in that costs £450,000 or less. No cash buyers here.
A Lifetime ISA can be used with other government schemes including Right to Buy, shared ownership and Help to Buy loans. You can even use it if you’re doing a self-build.
Beware of penalties
However, if you put the cash in a LISA and then don’t qualify to use it for a property (maybe it cost more than £450,000), you’ll need to pay a penalty to take it out or keep it for retirement.
You need to have the LISA open for a year or more to be able to use it for a home.
It’s important to note that there is no such thing as a joint ISA – however if you’re buying a home with a partner, providing you’re both under 40, you can both save in a LISA and use both accounts to pay towards the deposit!
How to spend the cash
When you’re ready to buy, ask your LISA provider to transfer the cash directly to your conveyancer/solicitor – not to you. If you do withdraw it to an account in your name, you’ll pay a stonking 25% withdrawal charge.
All your savings, including the bonus, will be available to use at exchange.
Save at least £1
If you’re in any doubt, the best thing to do is open an account with £1. If you don’t end up using it to buy your first home, you can use it as a pension pot, and access the savings once you reach age 60.
You aren’t tied to one provider so you can shop around for the best offer.
