For young people all across the country, owning a home can seem well out of reach. Saving up for a deposit in the current economic climate is challenging, especially for those paying rent while trying to put aside cash. Whether you’ve been saving for a while or are only just thinking about the future now, a Lifetime ISA from Wealthify could make your dreams of a home a reality.
What is a Lifetime ISA?
Designed for people aged 18 to 40, a Lifetime ISA helps you save for either your first home or retirement. The account works in a similar way to other ISAs in that you won’t have to pay tax on your interest. But this type of ISA only lets you grow your savings by £4000 each year and stops you from making any payments once you’re 50.
The biggest benefit of a Lifetime ISA is the 25% bonus the government adds to your savings. Each year you can earn up to an extra £1000 on top of your standard interest rate. This can help you to save for a deposit much quicker.
Can I Withdraw My Savings?
If you’re ready to buy a home, you’ll be able to use your account balance for that purpose, no matter how much is in there. But if you decide not to buy a home, the only other way you can withdraw the money is once you’re over 60. Withdrawing earlier is not a good idea, because you will have to forfeit 25% of your balance to take your money out. It’s also worth noting that anyone who becomes terminally ill will be able to access their cash if they have less than 12 months to live.
What Kind of Property Can I Buy?
The money from your Lifetime ISA is valid on homes that are worth £450,000 or less and you must use a solicitor or conveyancer to make your purchase. What’s more, you can’t use your account to buy a house without a mortgage, as it’s designed to help people to save for a deposit.
What If I Have a Partner?
People who choose to buy their first home with another person can still make the most of their Lifetime ISA. If both of you have an account, you’ll be able to use your combined savings and government bonus towards your property.
Is a Lifetime ISA the Same as a Help to Buy ISA?
It can be easy to confuse the two, but these are two different types of account. If you haven’t already opened a Help to Buy ISA, you will no longer be able to as they were replaced by the Lifetime ISA in November 2019. For those who have a Help to Buy ISA, savings can be used to buy a home until 2030. But if you’ve since opened a Lifetime ISA as well, you can’t use both to purchase a property and will have to pick one.