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Lifetime ISA for first-time homebuyers

lifetime ISA for first-time buyers

Lifetime ISA for first-time homebuyers

Making use of a Lifetime ISA to save for your first home

For first-time homebuyers, a Lifetime ISA provides a flexible, affordable option to invest and save. If you are between the ages of 18 and 39, you are eligible to open one and contribute until you are 50.

You are allowed to save up to £4,000 annually towards your first house, and the government will match 25% of your contributions, up to a maximum of £1,000 annually. Like other ISAs, the money in a lifetime ISA can increase without being subject to UK taxes, including any investment returns.

Purchasing a first home with a Lifetime ISA

There are a few factors to take into account while using a Lifetime ISA to save for first-time homebuyers

  • You must be a first-time buyer, which requires that you have never owned or been the owner of a residential property.
  • Before you can use the funds from a Lifetime ISA to purchase a property without paying a withdrawal penalty, at least 12 months must have passed since the initial payment was made into the account.
  • Choose carefully which account you select because you can only apply one government bonus towards your purchase if you have a Help to Buy ISA.
  • If you are purchasing a home with another person who is also a first-time home buyer, they may utilise their own Lifetime ISA and government incentive as well.

About your first home

  • The home must be located in the UK.
  • The withdrawal amount must be less than the purchase price and the purchase price must be £450,000 or less.
  • If it’s still being built, it must be your primary residence or immediately after it is finished.
  • You must use a mortgage or regulated home purchase strategy when buying the home.

You can still use your Lifetime ISA funds to pay for a house even if you don’t match the requirements for an eligible property purchase. But, you would be required to pay the government withdrawal fee, so you might get back less than you invested. Instead, you may save it for later in life. If you aren’t using your Lifetime ISA to buy your first home, you can typically start taking withdrawals at age 60.

If you are a first time buyer house hunting, then have a look at the properties we have available here at James Douglas.

Rebecca Trattou