Now that the Help to Buy ISA has closed to new customers, you might be looking for a new scheme that is designed to help first time buyers. The Lifetime ISA (LISA) could be an option for you.
This quick guide will help you to understand what the Lifetime ISA is and how it can help you save a deposit to buy your first house.
What is the Lifetime ISA scheme?
Any first time buyer can open a LISA savings account. The government pays in a bonus when you’re ready to take the money out of your savings as a contribution towards the purchase of your first home.
Eligibility requirements for Lifetime ISAs
Only first time buyers can open a LISA savings account. If you’ve ever owned property before, even if you’ve not bought property (such as an inherited house), you won’t be able to take advantage of the scheme.
If you’re buying as a couple, both of you can open a LISA to benefit from the savings scheme if you’re both first time buyers. If one of you has owned property previously, the other can still open a LISA account.
Anyone aged 18 – 39 can open a LISA and you can continue to pay money in once you’re over 40.
How a Lifetime ISA works
A Lifetime ISA (LISA) is a government scheme that offers great potential for receiving a bonus and has added flexibility for your future finances.
You can pay in up to £4,000 per year, for a maximum of 32 years until the age of 50. This can be paid in lump sums rather than a set monthly maximum. If you open a LISA aged 18 and pay in the maximum annual amount until you’re 50, you’ll receive a government bonus of £32,000 (on top of your total savings of £128,000).
You can choose to hold onto your savings and take them out of your LISA when you turn 60 instead. Doing this will provide you with the government bonus and is designed to give you the option of using the LISA as part of your retirement funding strategy.
If you choose to take out your savings to fund your first home purchase, the government will pay a bonus of 25% of however much you have saved.
If you decide not to buy a home and want to take the funds out before you’re 60 years old, you could face financial penalties and end up taking out less than you’ve put in.
How to use your LISA savings
Once you’re ready to buy a house, it’s time to seek expert mortgage advice.
Our mortgage advisers in Newcastle will help you to find the right deal as a first time buyer using your LISA savings as part of your deposit. They’ll make sure you understand the full process before you commit to anything, so you can be sure that you’re making a good decision for your circumstances.
Contact your local mortgage adviser today to find out more about getting a mortgage with LISA savings.
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