How i got a free £3000 bonus towards my first home
You’re saving money, working towards that deposit goal and the dream first home. But did you know that you could get there 25% faster if you choose the right home for your savings. Despite the boring names and acronyms the LISA otherwise known as the Lifetime ISA is where you should be saving for your first home.
For every £1 you save within a LISA the government will give you a 25p bonus. In other words if you save £1000 in a year the government will top the balance up by £250. It’s an astonishing deal and the best way for wannabee first time buyers to save for their first house. There are a few rules associated with the LISA and the odd reason not to opt for one so ill detail them below along with further detail on the best providers.
The Lifetime ISA
As mentioned in the TLDR the LISA or Lifetime ISA is a form of ISA specially created to encourage young people to save. That encouragement comes in the form of a 25% government top up on deposits that is available to be used for either a first home (the reason most of you are probably here) or the slightly more boring but no less important private retirement fund. The benefits of a LISA for retirement saving are not as clear cut as saving for your first home so I’ll cover that in a separate article. The LISA is also not an infinite money glitch like meme stocks and there are a few rules to follow:
- The maximum you can deposit per tax year is £4000
- The account holder must be over 18 years old
- The bonus is used towards a first house
- The bonus is withdrawn after the account holder has past their 60th Birthday
- The first home is purchased for below £450k
- The account must be open for a full year before the bonus can be used
How they work
Let’s take my example i was looking to buy my first home in Newcastle. I saved £300 per month for 3 years into a cash LISA with Nottingham Building Society. In total i made £10,800 of contributions, the government then provided a bonus of £2800 providing a total deposit of £13,600. Without that bonus i would of had a loan to value ratio below 10%, this would of heavily restricted the mortgages available to me, resulting in higher interest rates and therefore higher monthly repayments.
Double bonuses
If you are in the lucky position where both you and a partner are looking to buy a house together, then you can each save in a LISA and use your individual bonuses towards a deposit. This gives a theoretical maximum savings boost of £2000 per year if you were both able to save £4000 per year.
Sign me up
Ok you see the benefit now but where can you sign up. Surprisingly there are not a whole bunch of providers offering the account, below is an up to date list that I will add to as they come and go.
Stock and Shares LISA
As with ISA’s LISAS are available as tax efficient wrappers for your savings. You can choose where to invest your money and the same 25% government bonus on deposits is given. Be careful though, as with all investments your money is at risk and the value of investments can go up and down. If risk if your bag then the following investment platforms offer a stocks and shares LISA
The Help to Buy ISA
The forgotten brainchild of past governments. This is no longer available to open but some individuals may have opened one in the past and either are continuing to save into it or have cash sitting in it.
Fortunately, if you don’t want to buy a house in the next 12 months then the decision is fairly easy. You will get more free money by transferring the Help to Buy ISA to a LISA. The 12 months will mean the LISA has matured to the stage where home buying is allowed. Anything less than that and you should keep the money where it is and follow the Help to buy isa scheme when buying your first home.
Let me know in the comments if you have any questions or have used either scheme in the past.
