Definition
ISA – Individual savings account
Are lifetime ISAs helpful in buying a home?
Lifetime ISA accounts are predominantly used for buying your first home or saving for later life. To open a lifetime ISA you must be over 18 but under 40. The financial limit on these accounts is £4,000 each year until you reach 50. You MUST make the initial payment into your ISA before the age of 40.
To benefit from a lifetime ISA the government will add a 25% bonus to your savings. This is capped at £1,000 per year.
You can hold stocks and shares or cash in this ISA and even have a combination of both.
Why is it useful for first-time buyers?
Sometimes it can feel like saving for a house will take years. With a lifetime ISA saving for a home can be sped up. Let’s look at the finances:
Maximum £4000 a year [Divided by monthly payments] = £333 per month
+ 25% additional government funding per year = £1000
Total savings a year – £5000
Average deposit needed on a £250,000 first home – £25,000
The average time to save for a deposit is 5 years with a lifetime ISA. Using an ISA boosts your deposit by £5000 over 5 years + any additional interest earned by ordinary interest set by your bank.
To learn more details about a lifetime ISA visit the government website.