WHEN first-time buyer Chris White withdrew his £6,000 Lifetime Isa ready to put down a deposit for his home of his dreams, he knew he would be forfeiting £1,000.
Frustratingly, the deal fell through – but Chris thought he could put his money back into his account, keep saving, and get his bonus.
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However, he quickly learned this wasn’t the case – and a simple mistake cost him £1,000.
A LISA is a savings account that anyone aged between 18 and 40 can open to save for buying a first home or for their retirement.
You can put in a maximum of £4,000 a year until you’re 50, and the government adds an additional 25% bonus onto what you put in.
You get the bonus if you buy the property at least 12 months after you make the first payment into your LISA.
If you withdraw your funds earlier and close your account, like Chris, you’ll lose your bonus.
But Chris was disappointed to discover that he couldn’t reopen his account after he withdrew all funds – and he realised he had lost out on his LISA bonus for good.
If you completely clear your LISA account, it is considered closed and you need to open another one – but you can only open one per tax year.
He also had to pay a £300 fee because he pulled out his cash early.
When signing up for a savings scheme, make sure you get clued up on all the rules of using the account, AJ Bell head of personal finance Laura Suter said.
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“The rules of the Lifetime ISA differ quite a bit to other ISAs, meaning that it’s easy for savers to be caught out, leading to delays, admin headaches and potentially their home purchase being stalled,” she said.
“It’s vital that savers are aware of all the small print and quirks so they don’t fall foul of the rules.”
Despite pulling out of another deal as well, Chris finally went on to buy his £316,000 first home.
We picked his brains about how he overcame these complications to become a homeower for The Sun’s My First Home series.
Tell me about your home
It’s a two bed apartment on the first floor of a block of four flats.
It’s part of the Hawker23 development built by developer Pentland Homes.
The main bedroom has an ensuite, and a built in wardrobe too.
There’s an open plan lounge and living room area, with huge wall to ceiling windows.
I don’t have a balcony, but the beach is an eight minute drive from me.
How did you decide on location?
Scrolling through Instagram one day, a post popped up on my feed promoting the new development.
I messaged the developer on Instagram for more information – it responded instantly and I booked in a viewing the next day.
It was the show apartment that was on sale – it looked great and I reserved it the same day I saw it.
I also love the area – Folkstone Harbour really sold it to me, it’s very young and trendy with some cool cocktail bars.
How much did you pay for it
The flat was £316,000, and I used the Help to Buy scheme to afford it.
I took out a loan of £62,200, and I only had to put a 5% down at £15,800.
I took out a £238,000 mortgage over 40 years, at a two-year fixed interest rate of 3.8%.
My monthly repayments are £1,040.
Luckily, I was able to live with my best friend for 10 months which was a huge help for keeping my savings on track.
I was very fortunate because she didn’t want me to pay any rent, and said even if I did she would only give it back to me at the end when I moved out.
Were there any complications?
I had pulled out of two deals last year before I finally landed my first home, and it cost me nearly £2,000.
I put an offer down for a Shared Ownership home, and was told that I would be able to exchange in November.
Completing that early meant that I would lose my Lifetime ISA bonus.
You get the bonus if you buy the property at least 12 months after you make the first payment into your LISA.
But I was willing to lose the bonus if it meant I could get my dream home, so I pulled my money out of my account anyway.
But this date kept being pushed back and back, until the developer said it would be until at least March when I would be able to move in.
Desperate to move earlier than this, I pulled out of the deal, and lost about £450 in fees and costs I’d already paid.
I thought I would be able to put my savings back into my LISA – but the rules say you can’t do that.
And I didn’t realise that I would be charged an admin fee for withdrawing my money early, so I was charged £300.
I went on to put another offer in for a shared ownership home.
But the same thing happened again – the developer kept pushing back the completion date.
I was told we would exchange in October, and then this got pushed back to April.
Sick of being messed around, I took another £450 hit on fees and costs I had already paid for.
It was really annoying – especially losing my LISA bonus.
How did you save for it?
A money saving app really helped me keep on track with my savings goal.
I downloaded Moneybox and used it to put money into my LISA and track how much I was saving.
Through the app, you can set up regular deposits, and round-up your transactions putting spare cash into your savings.
It shows how close you are to your budget targets, which helped me to stick to my savings plan.
I stashed away £4,000 into the app in total.
I cut back on luxuries like shopping and socialising too.
I’m into clothes and gadgets, and could spend up to £300 a month on this – but slashed this down to £50.
Going out for meals and drinks with friends would cost me £150 a month, but I cut this to £50.
How did you afford to furnish it?
The flat I bought was used as a show home, and all the furniture, cutlery and appliances were included in the price of the house.
It came with a bed, drawers, chairs, tables, lamps, sofas, mugs, plates – even a TV on the wall.
It meant I didn’t have to buy hardly any new furniture – everything was worth a total of around £7,000 to £10,000 I reckon.
What’s your advice for other first time buyers?
Keep an eye on the government help schemes available.
I tried to go for a shared ownership home initially before opting for a Help to Buy loan in the end.
But make sure to research these schemes carefully – for example, you need to pay rent to the housing association you co-own your house with if you buy a shared ownership property.
One couple sold their CAR to raise cash for the deposit needed for their first home.
Here’s how one couple bought their first home by taking up a second job pulling pints.
