How a Lifetime ISA can help you purchase your first home

Our Independent Financial Advisors share everything you need to know when it comes to a Lifetime ISA and saving for your house deposit in this blog. Please note, the information has been provided by Mortgage Advice Bureau on behalf of Gleeson. We recommend you obtain independent financial advice.

What is a Lifetime ISA (LISA)?

A Lifetime Isa (LISA) offers a tax efficient way of saving for your deposit for your first home. The interest generated by your savings is tax free (or investment growth if you decide to invest in stocks and shares), and upon drawdown for deposit, the government will provide a 25% bonus of the amount saved on top. To achieve this bonus, you must have had a LISA open for more than 12 months. 

This means that if you have managed to save £20,000 in your LISA over five years the government will top your deposit up by a further £5,000! This could potentially mean a lower interest rate on your mortgage.  

How a Lifetime ISA Works

• You must be aged between 18 and 39 to open a LISA 

• You get a 25% bonus on your savings and investment when you drawdown for your first house purchase 

• You can have a LISA and a cash ISA and contribute to both in the same tax year 

• The interest or investment growth in a LISA is tax free 

• You will pay a penalty for withdrawing from your LISA for any other reason other than to purchase your first home or for retirement 

• You’re not tied to your first provider; you can transfer your LISA to other providers 

• Your savings are protected in your LISA up to £85,000 per financial institution.  

What are the rules of using a LISA to purchase your first home?

There are some very clear rules with regards to a LISA that you need to follow when using it to purchase your first home. 

• A first-time buyer (FTB) is defined as someone who has never owned property before anywhere in the world, if you have then you cannot use a LISA. This includes any property (or share of) that you inherited, even if you didn’t live there. This also includes any company or trust that you own, or part own that does or has owned a property. 

• The maximum purchase price for a property is currently £450,000. You cannot be purchasing a property to let out and the purchase must involve a mortgage. 

• You’re allowed to combine using your LISA with other government schemes, such as HTB (Wales), Right to Buy, First Homes, and Shared Ownership. 

• You can open a LISA with as little as £1, so it’s advisable that if you ever think that you will be a first-time buyer in the future, to open one as soon as possible. 

• Each person has a LISA allowance so you can have two x bonuses! 

• Ready to Buy – don’t withdraw the funds yourself, ask your LISA provider to transfer the funds directly to your solicitor/licensed conveyancer. This needs to be within 90 days of completion (no more). If the purchase falls through, you won’t lose out, the funds will be transfer to the LISA account they came from.  

The Lifetime ISA offers a great incentive to start saving for your first home, with a great bonus, alongside potential other schemes either from the government or from Gleeson Homes, providing a larger deposit to potentially allow a lower mortgage balance and interest rate that may be available.

To start the search for a brand-new home with Gleeson, discover our list of developments and contact one of our Sales Executive to find out more.