Lifetime ISA: Best Way To Boost Your House Deposit!

Already saving for your first house or want to start? This account is the perfect place to keep that money! You know why? Because the government will give you an additional £1000 each tax year just for saving your money there. Cool right!

So what is this magical account? The account you need to look into is called a LISA…

What is a LISA?

LISA stands for Lifetime Individual Savings Account. It is the scheme that was introduced a couple of years ago to replace the Help to Buy scheme. It’s essentially the new and improved Help to Buy. You can add up to £4,000 into the account each tax year and the government will give you a 25% bonus on anything you add. That’s an extra £1000 each tax year just for saving your money in this account. The only drawback of this account is that you are limited in how you can use the money. You can only withdraw the money penalty-free for two reasons; to buy your first home or when you turn 60.

Can I open one?

If you are a UK resident aged 18-39, you can open and save in a Lifetime ISA. The primary purpose of a LISA is help Brits get on the property ladder so the account is ideal if you are saving for your first home. But even if you have already bought your first home you can open a LISA and use it to save for retirement.

How does it work?

Lifetime ISA is an account type, just like a current account or a regular saver. So you first need to choose a provider before you can open an account. One thing to take into account when choosing a provider is whether you want a simple cash Lifetime ISA or one that will give you the option to invest the money which is a Stocks & Shares Lifetime ISA. If you want a Stocks & Shares version, the provider options become more limited. This article from Money Saving Expert has a great comparison table to help you pick a provider.

Once you have chosen a provider, opening an account is a simple as following the steps on their website and getting yourself set up. Then it’s time to start saving!

PROs:

• You can choose to keep the money as cash or invested or a mixture of the two.
• That 25% bonus!! Tell me another account with a 25% interest rate
• Incentivised to not touch the money as you face a 25% penalty if you withdraw for reasons outside of the set ones.
• Returns are tax-free.

CONs:

• Limited to how you can use the money BUT you can withdraw it if you really need access, you just have to pay the penalty.
• The £4,000 counts towards your ISA allowance, reducing the amount you can save/invest elsewhere.
• You have to have the account open for at least a year before you can use it for your deposit.
• Set parameters for the house you can use it to buy – must be under £450k, in the UK and a property for you to live in.

There you go, the best way to boost your deposit by an extra grand each year! Are you using a Lifetime ISA to save for your deposit? No? Are you thinking of opening one?