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There’s no place like home: How to make the most of your savings when looking to buy your first home

With the Help to Buy ISA closing to new applicants in November 2019, and some may be feeling unsure as to how best to get onto the property ladder. However, Foresters Friendly Society has outlined the five ways in which the Lifetime ISA could be the perfect substitute to help you on your journey to home ownership.

  1. Everyday is Payday: With the Lifetime ISA, the government will give you a 25% bonus on the total amount you pay in, not including investment interest or investment growth that you earn. Put simply, this means that if you were to pay in the maximum amount of £4,000 per year, you’ll receive a tax-free bonus of £1,000 that year.
  2. Go Big or Go Home: Unlike the Help to Buy ISA, which can only be used on homes worth up to £250,000 outside of London and £450,000 in London, a Lifetime ISA can be used for homes worth up to £450,000 both in and outside of London. With house prices in the UK worth on average £234,853[1], a higher allowance will stand you in good stead when you come to buy your first home should house prices rise.
  3. 2 become 1: If you are planning to buy a home with your partner (who is also a first-time buyer), you can both open your own Lifetime ISA and each pay in up to £4,000 per tax year to receive the 25% government bonus. But remember, the £450,000 limit on the full cost of the home you are looking to buy doesn’t increase, even if there are two of you contributing with separate Lifetime ISAs. 
  4. A Family Affair: Buying a house is a big commitment, so if your family want to help you out to reach that savings goal quicker, it’s important to know how much they can gift tax free. Grandparents and parents can gift up to £3,000 each tax year in assets or cash, and while they can’t invest directly for you, you can move the money they gift into your Lifetime ISA.
  5. Little or Lots: With a Lifetime ISA you have the flexibility to contribute regular amounts of at least £50 per month or through lump sum contributions of at least £500. Alternatively, you can use a combination of both, so long as your contributions don’t exceed £4,000 per tax year.

The Foresters Friendly Society Lifetime ISA can be set up by UK residents aged 18-39 and direct debits or lump sum investments must be paid from a UK bank account. To transfer a Lifetime ISA or Help to Buy ISA into our Lifetime ISA, simply download a Transfer Form and submit your application by post. We will then manage the process on your behalf.

This article is intended to provide information, not financial advice, to help you make an informed decision about savings and investments. We do not offer financial advice. You should contact a financial adviser, who may charge a fee, if you want financial advice.

You should also be aware that in some investment conditions, you may get back less than you have paid in. Please note that tax rules may change in the future and depend on your individual circumstances. 

[1] http://landregistry.data.gov.uk/app/ukhpi