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.

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