A Lifetime Individual Savings Account, also known as a LISA, is a great way of boosting your savings for that all-important, first mortgage deposit. So, how does a LISA work and can I have one?
How a LISA works
First of all, as the name implies these are individual (sole) savings accounts. This means that if you are planning to buy a home with someone else, you both can have your own account. Here are the key features you need to be aware of-
- The most you can save in your account is £4,000 each tax year.
- You will receive a 25% bonus from the government. This bonus is paid monthly.
- The bonus you can earn is limited to £1,000 in a tax year.
- The amount you can pay into your LISA is linked to your annual ISA allowance of £20,000 (2019/20). So, if you pay in £1,000 to your LISA, you can still pay £19,000 into other ISA products.
Remember you can open different types of Isa’s in the same tax year.
How is your bonus paid?
Her Majesty’s Revenue and Customs (HMRC) will calculate the bonus payments on a month-by-month basis. The bonus is calculated based on deposits you make into your LISA from the 6th of the month to the 5th of the following month.
However, check how your account provider will treat bonus payments. This can differ as follows-
- They will re-invest your bonus payments, taking advantage of any potential growth and increase in value.
- They may put your money into a non-interest earning cash account. This means you could miss out on interest or future potential growth of your invested fund.
Take care and choose what’s best for you. Remember the best interest rate is not always the best overall account for you.
Can anyone get a LISA?
To be eligible to open a LISA, you need to be-
- You need to be over 18 and under 40 years old.
- A United Kingdom (UK) resident or a member of the armed forces serving abroad.
- You can make payments into a LISA up to the age of 50.
What is the catch?
If you want to use a LISA to buy a home, there are a few restrictions you need to be aware of-
- Only first-time buyers can use LISAs to buy a home. That means you can’t own or have owned, a home in the UK or anywhere in the world
- You can use a LISA towards a home if the property costs £450,000 or less.
- You must save in to the account for at least 12 months.
- The scheme is not for buying a home you want to rent out, or a holiday home. Above all, you must be buying a home you plan to live in.
- You must be buying the home with a repayment mortgage.
- Currently, you can combine your LISA with other schemes such as Help to Buy.
What happens if my partner is not eligible for a LISA?
Buying a property together using a LISA need not be complicated. To start with, if you both meet the eligibility criteria, you can combine your LISAs to buy a property together. Alternatively, if only one of you is eligible, because, say, they already own a home, then only the eligible person can use a LISA.
How Anstee & Co can help you
We are a firm of independent mortgage brokers. This means that the advice we offer is unbiased. We will look at all the financial solutions that are open to you.
The initial meeting is at our cost and is without obligation. Why not arrange a meeting today to see how we can help you. A meeting can be at a time and location that is convent for you. This may be at the weekend or early evening. Meetings can be at your home or one of our office located at-
- Kettering, Northamptonshire
- Stamford, Lincolnshire
- Towcester, Northamptonshire
- London, Pall Mall, Greater London
Also, our advisers live and make use of meeting rooms in-
- Bedford, Bedfordshire
- Market Harborough, Leicestershire
- Northampton, Wellingborough, Thrapston and Rushton in Northamptonshire
Finally, if you have any comments about this article “Buy your first home with LISA” then it would be great to hear from you.
AS A MORTGAGE IS SECURED AGAINST YOUR HOME, IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.