Buying your first home is an exciting milestone, and ISAs, or Individual Savings Accounts, can be valuable to you as you take this step. This brief guide breaks down ISAs and how they can help you, as well as tips on how to best use them to your advantage.

ISAs differ from other accounts in that they have unique tax advantages. You are rewarded with bonus interest rates reflective of how much you invest into this scheme. For first-time buyers, the two main types are Help to Buy (H2B) and Lifetime (LISA).

At the time of writing, H2B ISAs are now closed to new applicants. If you managed to set one up before the deadline, here is how it can help you.

  • When you put money into the H2B ISA, the government adds a 25% bonus to your savings, up to a maximum bonus of £3,000.
  • This helps you amass a more substantial deposit when buying your first home.
  • If you want to use the savings in your H2B, you must put it towards a property costing no more than £250,000 (£450,000 in London).

Note – There’s a limit to how much you can save each month, allowing a maximum of £200. You can do this up until 30th November 2029. You then have until 30th December 2030 to claim the 25% state bonus.

Also – this ISA bonus only helps with the mortgage deposit, not the deposit you send to the buyer at exchange.

The Lifetime ISA (LISA) is a more long-term saving option. With the same 25% bonus on savings, you can save up to £4,000 a year, versus £2,400 in a H2B. You can open one now, if aged between 18 and 39. You will only be able to use the money 12 months after the LISA’s been open, so if you’re planning on buying within the next year, there isn’t any point in switching.

The other key features are:

  • No maximum bonus cap on the LISA, unlike the 3K on the H2B.
  • LISA savings can be used on the home AND mortgage deposit, whilst the H2B only covers the latter.
  • With LISA, bonus is paid monthly.
  • £450,000 property price limit (regardless of location).

Overall, these are a fantastic opportunity for first-time buyers in the UK to boost their savings. Based on your specific circumstances, one may prove more beneficial to you than another. As you make the first step on the property ladder, these bonuses can significantly contribute to you turning your homeownership dreams into reality.


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