A Lifetime ISA can help you buy your first home
You can use a Lifetime ISA (Individual Savings Account) to buy your first home. You must be 18 or over but under 40 to open a Lifetime ISA.
You can put in up to £4,000 each year, until you’re 50. You must make your first payment into your ISA before you’re 40.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
Withdrawing money from your Lifetime ISA
You can withdraw money from your ISA if you’re:
- buying your first home
- aged 60 or over
- terminally ill, with less than 12 months to live
You’ll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason (also known as making an unauthorised withdrawal). This recovers the government bonus you received on your original savings.
An example:
Assuming no growth, initial savings of £800 will earn a 25% government bonus of £200 and give you a pot of £1,000. If you wish to withdraw the entire pot, a 25% charge will apply to the full £1,000. You’ll have to pay a government withdrawal charge of £250. This will leave you with £750.
If you only wish to access some of your money, you’ll have to take the withdrawal charge into account when requesting funds. You’ll have to withdraw more than the amount you need, to cover your needs and the 25% withdrawal charge.
Buying your first home
You can use your savings to help you buy your first home if all the following apply:
- the property costs £450,000 or less
- you buy the property at least 12 months after you make your first payment into the Lifetime ISA
- you use a conveyancer or solicitor to act for you in the purchase – the ISA provider will pay the funds directly to them
- you’re buying with a mortgage
Buying with someone else
If the person you’re buying with has a Lifetime ISA, they can use their savings and government bonus too. That’s great news!
If you have a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus from one of them to buy your first home.
You can transfer money from a Help to Buy ISA to a Lifetime ISA. If you transfer money from a Lifetime ISA to a Help to Buy ISA you’ll have to pay the 25% withdrawal charge.
Your home may be repossessed if you do not keep up repayments on your mortgage
