The UK Gov wants to help you. They launched a brand new ISA giving first-time home buyers a 25% bonus. HELLO LISA!
What’s the score?
You can save up to £4,000 a year and the gov will add a £1,000 (25%) bonus. When you are ready, you can use this money towards your first home.
Anything in the small print?
Yes. You need to hold a LISA for at least a year before you can use it and the money can only go towards a home costing up to £450,000.
What if I want to buy a home within a year?
Then LISA isn’t for you. Instead look at the Help-to-Buy ISA which also offers a 25% bonus but you could access this after 3 months of saving.
What if I change my mind?
Penalty! Withdraw your balance and 25% is knocked off. It isn’t as bad as it sounds because your balance includes the bonus. Say you deposit £4,000 and get £1,000 bonus, taking the balance to £5,000. If you withdraw, 25% is deducted and only £3,750 is returned to you. That is £250 less than you put in (or 6.25%). Painful but not devastating.
If you’re really not sure if you will buy, then go with a Help-to-Buy ISA because there are no penalties on withdrawing but you won’t get the bonus (you can’t have it all!).
Help! I can’t decide between a LISA and Help-to-Buy ISA…
This is common because the two accounts are very similar. Take our 30-second test to find out which is best for you.
Do I have to buy a home with a LISA?
No. You can stash your cash in there until you are 60 and withdraw the money, bonus et-al, in a lump sum. Horray, an extra 25% bounce into retirement BUT higher-rate and additional-rate tax payers (earning over £45,000 a year) HOLD-UP because you can get a much better deal – 40% or 45% tax-relief - by depositing into your pension pot.
LISA is my match. Where do I sign-up?
Online brokers Hargraves Landsdown and Nutmeg are the first to offer LISAs and more will follow as we head towards 2018.