LISA: The Lifetime ISA

What is the LISA?

Reading Time: 1 min

ISA

This is an Individual Savings Account you can use to buy your first home or save for later life, like retirement.

You have a limit of £4,000 that you can put in each financial year until you are 50.

When you are 50, you will not be able to pay into your LISA or earn any bonus, however your account will stay open and you will earn interest on your savings.

Your annual ISA limit is £20,000, so the cap of the £4,000 LISA limit counts towards your annual ISA limit. Bare in mind that you are only allowed to open one ISA per tax year, so you lose out on £16,000 worth of tax free savings.

Back to the LISA. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

Terms and Conditions:

  • You must be 18 or over and under 40 to open a Lifetime ISA
  • You will be charged 25% if you withdraw money from your ISA for any reason other than:
  1. To buy your first home
  2. At aged 60 or over
  3. If you’re terminally ill, with less than 12 months to live

The withdrawal fee is to recover any Government bonus, essentially withdrawing money for any other reason than the above will result in you receiving less money than you paid in.

  • For first time buyers, the price of the property has to be £450,000 or less and you must use a solicitor or conveyancer to act on your behalf as the LISA provider has to transfer the funds directly to them.

 

Over the last few weeks, we’ve explored the various schemes available for First-time buyers/Home movers with the Governments assistance. If you’ve missed out, or have just joined us, feel free to catch up on the posts here:

 

 

Photo credit: homesandproperty.co.uk via Google search.

Help to Buy: ISA

fullsizeoutput_6

Reading Time: 3 mins

A Help to Buy ISA is something all First Time Buyers can benefit from. Whether you decide to use a Government Scheme or go the Standard Mortgage route, you can maximise your savings.

The Help to Buy ISA was an initiative the former Chancellor George Osborne and the Government set up to help First Time Buyers get on the property ladder in December 2015, however the scheme will be closed to new savers on the 30th November 2019.

You will only receive the Government bonus when you are close to completing on the purchase of your property.

The great thing is that a H2B ISA isn’t a per household account, but a per person account. So essentially, you and your partner can get a bonus as little as £600 or as high as £6,000

How much bonus will you get from the Government?

Savings below £1,600 = £0 from the Government as the funds are insufficient

Savings between £1,600 and £12,000 = A 25% top up from the Government

Savings over £12,000 = A £3,000 top up from the Government

Screen Shot 2018-10-15 at 13.33.52

How it works:

  1. You open your Help to Buy ISA
  1. Make an initial deposit of £1,2000 and the maximum of £200 per month there after.
  2. Continue saving. Build up a strong balance
  1. Find a property in your price range, make an Offer and go through the Home buying process
  1. When you are close to completing on your purchase, your solicitor will apply for your Government bonus.

Things to consider

It’s important to note that there have been many occasions where the bonus is not paid to the applicants until after completion has taken place.

Yes, they got the money and wasn’t scammed out of the scheme, however, the bonus funds couldn’t be used towards the deposit.

If you don’t particularly need the bonus to make up your deposit, this is great as you’ll have funds available to kit out your new home and buy some very needed furniture, accessories and electronics after completion.

The downside is that if you had calculated the bonus in to the mandatory deposit amount which is quite time sensitive in acquiring around exchange etc, then you can find yourself in a bit of a pickle.

Your maximum ISA allowance per tax year is £20,000 – this includes a standard Cash ISA, Lifetime ISA and Help to Buy ISA*

*You cannot get a first-time buyers bonus on both the Help to Buy ISA and Lifetime ISA

Screen Shot 2018-10-15 at 13.39.34

What to do?

If you’re a First Time Buyer, I’d 100% say to open a Help to Buy ISA NOW even if you have no desire to get on to the property ladder any time soon

Don’t depend on the ISA to complete/make up your deposit

See the Help to Buy ISA as a post completion fund. A fund to kit out your new home and cover any post completion unexpected expenses.