Martin Lewis' MoneySavingExpert explains how to get £2,000 towards your first house
Martin Lewis' MoneySavingExpert website explained how to get £2000 each year toward your first home.
By opening a Lifetime ISA (LISA) account, you can gain a free 25% cash boost from the government.
How much can you gain each year?
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In a LISA, you can only save up to £4,000 in a year, so the maximum bonus you can pocket is £1,000.
However, if you're a couple and saving for a home together, you could open a LISA account each - meaning you could potentially get £2,000 free each year.
“With a Lifetime ISA, the state adds 25% on top of what you save, which can mean a free £1,000/year,” explained the MSE team.“If you're in a couple, you can both save into a LISA and double the bonus. And even if one of you isn't a first-time buyer, the other can still do it.”
How does a LISA work?
Anyone aged between 18 to 39 can open a Lifetime ISA for free, however, the money must be used to buy your first home or for your retirement once you've reached the age of 60.
The bonus is paid monthly, and your money gains interest too. However, you only get a bonus on your contributions, not on the interest.
The maximum bonus in a LISA is £33,000 if opened at 18 and maxed out until you turn 50. LISA's can't be paid into beyond the age of 50.
Are there any other first-time buyer schemes?
There are several other first-time buyer schemes to help save for a home.
Help to Buy equity loan: Savers can buy a home with a 5% deposit, and the government will lend you up to 20% (or 40% if in London).
You will have to begin paying interest on the loan after five years at a rate of 1.75%.
Help to Buy is only available on new-build properties and there are maximum property values set in different parts of the UK.
The loan will run until March 2023 unless extended by the government.
Help to Buy ISA: These ISA's closed to new savers on 30 November, 2019.
If you have already opened an account, you can keep saving until 30 November, 2029. But you must also claim your bonus by 1 December, 2030.
You could open an account with a maximum of £1,200, but you're limited to saving just £200 a month into it.
The government will add to your savings with a 25% bonus. The maximum you can get free is £3,000, and you'd need to save £12,000 to get this.
Mortgage guarantee scheme : Savers can put down a 5% deposit and the government acts as a guarantor if a payment is missed.
While the scheme is marketed at first-time buyers, it’s not just limited to just those.
Guarantor mortgages will be available to anyone buying a property costing up to £600,000 unless they are investing in buy-to-let or second homes.
Some lenders also continue to offer 5% mortgages outside of the government-backed scheme that may be cheaper for borrowers.
Shared ownership: Where you buy a share of a property - between 25% and 75% of the property value - and pay rent on the rest.
The share you can buy is usually between 25% and 75% but can be as low as 10% on some homes.
Under “staircasing”, you slowly increase the amount of the property you own.
Shared ownership isn’t limited to first-time buyers, but to be eligible, you need to have an individual income no greater than £80,000 a year or £90,000 a year in London.
Your combined income can't be greater than these caps if you're buying as a couple.