Martin Lewis, the founder of Money Saving Expert (MSE), has shared a straightforward savings tip that could earn you a free £1,000 cash bonus towards your first home. During the latest episode of the Martin Lewis Money Show on ITV, he covered a range of topics including underclaimed Department for Work and Pensions (DWP) benefits, Ofgem’s energy price cap, and how to get free cash towards your first home.
When asked where the best place for an 18 year old to save money for a house deposit would be, Martin was clear: “without any doubt” the first place to look is the Lifetime ISA savings account. He explained that the Lifetime ISA or LISA is a tax-free savings account where the government gives you a 25% bonus on your savings.
He further elaborated: “People can open a LISA on the day of their 18th birthday, and they can open one until the day before their 40th birthday. That is the very last time they can open one, and once it’s open, it stays open.”
“When you can open it, it gives you a 25% boost on what you put in. So if you put in £1,000 in one month, the state will add £250 pounds that month, and that will be sitting in your lifetime ISA account. That amount will get interest on top of it as well, and it will keep doing that until you’re age 50. As they have been around since 2017, the oldest people with LISA’s are 46, so we’ve not yet hit it, so they’re still getting that 25% contribution.”
Martin Lewis explained: “The most you can put in per tax year is £4,000, which means you can get up to £1,000 free per year, and you get that each year. So if you had it for 10 years, you would have £10,000 free from the state.”
However, he also warned of some “caveats” with the LISA, including a 25% withdrawal penalty if the money is withdrawn for any reason other than a first home or retirement. He clarified: “Now, you might think you’ve got a 25% bonus and a 25% penalty means you break even-that’s actually not how it works. If you accumulate £10,000 and then get a £2,500 bonus, your account would show £12,500. But a withdrawal results in a balance of only £9,375. In essence, you’re down by £625 from your initial investment because of the punitive withdrawal fee.”
Additionally, Martin highlighted that the property value cannot exceed £450,000 to qualify for the LISA when buying a first home, which could be a challenge for those in London.
Financial guru Martin Lewis has recently highlighted a crucial point regarding the Lifetime ISA (LISA), emphasising the importance of timing when it comes to qualifying for the government bonus. In his advice, he urged: “If you’re aged between 18 and 39 and you’ve not got a LISA and you haven’t bought a property, go and put £1 in one. Even if you don’t want to save for a first property.”
He stressed the strategy for prospective first-time homebuyers by saying, “Why? Because the clock is ticking, when you are ready to put money in, you could put £4,000 in and get £1000 straight away. Parents of people aged 18, 19 or 20 go and give them a £1, they will still take it, and tell them to open a LISA because it will then be there, ready and waiting.”