01

Build the complete target

A deposit is usually expressed as a percentage of the purchase price. A £300,000 home with a 10% deposit requires £30,000, while a 5% deposit requires £15,000. A larger deposit reduces the loan-to-value ratio and can widen the range of mortgage deals.

Add legal work, surveys, mortgage fees, property tax where applicable, moving costs and a reserve for the first months of ownership. Keeping these amounts separate prevents the completion statement from consuming the emergency fund.

02

Understand the Lifetime ISA

A Lifetime ISA can accept up to £4,000 a tax year, with a 25% government bonus of up to £1,000. It must be opened before age 40, and contributions can continue to age 50. Two eligible first-time buyers can each use a LISA for the same purchase.

For a charge-free first-home withdrawal under the existing rules, the property must cost £450,000 or less, the account must have been open for at least 12 months, and the purchase must meet the other conditions. An unauthorised withdrawal normally carries a 25% charge on the withdrawn amount.

03

Keep the account aligned with the date

Money needed within a few years is usually better matched to cash than market investments because the purchase date may arrive during a fall. Compare easy-access, notice and fixed-term accounts by rate, access and deposit protection.

A cash LISA may suit a near-term purchase; a stocks and shares LISA carries investment risk. The wrapper does not remove the risk of the assets held inside it.

04

Make the monthly system visible

Divide the remaining target by the months available, automate a transfer after payday and direct any LISA-eligible amount with the annual limit in view. Review the target as property prices, income or the intended area changes.

The government has announced future reform of first-time-buyer ISAs. The rules described here apply on the review date; check GOV.UK and the provider before contributing or committing to a purchase.

Sources and further reading

Follow the evidence