Help for first-time buyers: LISA

Buying a property is one of the biggest expenditures you will ever make. Getting on to the property ladder is an important step in your property ownership journey. However some may struggle to find affordable housing as a first-time buyer. There are a number of schemes available to give eligible buyers a helping hand. In this series we’ll discuss four schemes, starting here with the Lifetime Individual Savings Account (LISA).

What is a first-time buyer?

For the schemes we discuss in this series, a first-time buyer has never owned a property anywhere in the world. As well as homes you have purchased, inherited property will make you ineligible. This is the case if the inheritance was a shared or complete ownership, and even if the property was sold immediately.

An illustration of a hand picking up a small model of a home in a pincer grip, from a tabletop. There is a shadow of the arm on the wall behind.

Lifetime Individual Savings Account (LISA)

A LISA* is a specific type of ISA for those looking to save for their first home or retirement. You can save up to £4,000 per financial year to put towards the deposit on your first home purchase. The home may have a maximum value of £450,000. Alternatively it can be used in retirement after the age of 60. The £4,000 allowance for LISA contributions is taken from the overall £20,000 ISA allowance. So, if you contribute the full allowance to a LISA, it leaves £16,000 allowance for Cash or Stocks and Shares ISA contributions. Contributions can be made by others on your behalf, with a total of £4,000 able to be contributed to the account each year.

The government will add 25% tax-free bonus each year, calculated monthly. This means that you could have an extra £1,000 added to your LISA each year. You’ll earn interest on the money in your LISA, including the governmental bonus, and the interest is tax-free. The government bonus is given in each year that contributions are made into the LISA, until you reach 50. Interest is still earned on your invested funds after you turn 50, but no contributions can be made after this time.

Who is eligible for a LISA?

To be able to open a LISA, you must be a UK resident between 18 and 39 years old. You must have had a LISA for a full year before you are able to withdraw funds from it. If buying a home with someone else, you are able to have a LISA each which you can both use towards your deposit. Unlike with other schemes, though, a LISA can be used even if the person you are buying a house with is not a first-time buyer. The LISA can be used alongside other schemes including First Homes, Share Ownership and Right-to-Buy.

LISAs can be used towards the deposit on residential properties, though not on buy-to-let properties.

An illustration of an upturned palm of a hand with a house on it, surrounded by stacks of coins. Another hand is dropping coins around the house from the top

What if I don’t use my LISA savings for a first-home deposit or retirement?

Penalties of 25% are applied on withdrawals from your account that are not for the intended use. Even when taking the governmental bonus into account, this will still mean you will get less money back than you invested.

Can I keep making contributions after making a withdrawal?

Yes! For example, if you make a withdrawal for your first-home deposit, you can continue to contribute to your LISA. You’ll still be able to take advantage of the government bonus, and continue to save for your retirement!

A pink piggy bank with stacks of illustrated gold coins around it, on an orange background

How can Bell Mortgage Solutions help?

Getting on the property ladder is a huge milestone for everyone. We’ll ensure you’re supported throughout your purchase journey. We’ll start by assessing your affordability, giving you an understanding of the house values you should be looking at. Our team can advise on available help you may be eligible for. If you’re not eligible for any, we’re still able to help you find the right mortgage for your needs.

Please note: Your home may be repossessed if you do not keep up repayments on your mortgage.

*Please be aware that by clicking onto the above link you are leaving the Bell Mortgage Solutions website. Please note that neither Bell Mortgage Solutions nor PRIMIS are responsible for the accuracy of the information contained within the linked site accessible from this page.

The information contained within was correct at the time of publication but is subject to change.