A couple has explained how they’ll make an extra £2,000 each year to put toward their first-time home by using a special type of ISA savings account.
Lifetime ISA (LISA) accounts give you a 25% bonus from the Government on your savings. You can put away up to £4,000 every tax year, which means a bonus of up to £1,000. You can save less than this and still get your 25% bonus - for example, if you save £2,000, then you’d get a bonus of £500.
If you’re saving in a couple, then you can each open a LISA and get £1,000 every year on top of your savings, providing you’re both first-time buyers. LISA provider OneFamily has found its average 25-year-old LISA account holder has landed a free bonus of £1,725.
Stanley Fulker, a 27-year-old gardener living in Sussex, is saving for his first home with his girlfriend, Abbie. The couple live in with Abbie’s parents after they unexpectedly had to leave their rented flat. They are now saving as much money as possible to max out the LISA bonus.
Stanley said, “I opened my lifetime ISA in 2021 and it’s really helping me build up savings for our first home, I think it’s a fantastic way to save for a house. It offers a beacon of hope to getting on the property ladder, especially with the 25% bonus, which can mean up to an extra £1,000 a year.
“When I was renting, I felt like I was giving someone else all my money. So, we decided we didn’t want to rent forever and would buy our own home. I want to have our own place where we can put pictures up, paint the walls and make it ours.
“Abbie and I were previously living in a flat together, but the landlord said they needed the property back and we had two months to move out. We now live with Abbie’s family and, although we are paying for rent, bills and food, we’re still able to save much more than if we were renting privately. We’re each putting aside about £333 per month, which will help us reach the maximum limit of £4,000 for the year and get the free bonus of £1,000 each.
“We don’t know exactly what type of property we want yet but I want it to have a garage. Abbie wants a disco floor, so if we had a spare room we’d put in some Saturday Night Fever style lights in. Ideally, we’d like to buy a house within the next five years, but we’ll have to see what happens and how much everything costs.”
Lifetime ISA - what you need to know
Anyone between the ages 18 and 39 can open a LISA account - but it can only be used for buying your first home or for retirement. If you try to access your money for any other reason, you'll face a a 25% withdrawal penalty which not only wipes out the bonus, but also part of your original savings.
You should also be aware that any property you're buying with a Lifetime ISA must be below £450,000. This can be a problem for first-time buyers in more expensive locations such as London. You can keep saving into your account until you turn 50, which is useful if you're using it for retirement.
Jackie Davies, Customer Operations Director at OneFamily, said, “It’s tough for young people who want to get on the property ladder. Price rises of everyday items and rent over the last few years have made it even more difficult to put money aside each month.
“The LISA helps aspiring homeowners take that first step onto the property ladder. Thousands of our customers have already made the most of the bonus and received free money from the government towards their first home. Young adults are facing difficult challenges, but there are tools out there to make savings go further and support people as they enter the next stage of their lives.”