We’re first-time buyers – our ISA mistake cost us free cash for £127,000 home, how to avoid it happening to you
OVERLOOKING a key detail on their savings accounts meant Christopher Jones and Rhiannon Williams missed out on free cash for their first home.
Christopher and his fiancé Rhiannon, both 23, withdrew money from their Lifetime Isa too soon, which meant they forfeited their 25% government bonus.
A LISA is a savings account that anyone aged between 18 and 40 can open to save for a first home or 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.
But the couple, who were both university students at the time, didn't clock this condition when they signed up.
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They both opened a LISA in September 2019 and stuffed around £500 each into them.
This meant that between them, they could have been eligible for a bonus of around £250.
But they agreed to complete on their house in August 2020 - a month early.
This is because they didn't want to have to pay an extra £600 in rent by staying in their rental property for an extra month.
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Keen to move into their new home sooner rather than later, the pair forfeited the free cash.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "The best way to avoid this pitfall, is for anyone who is eligible for a Lifetime ISA to pay in £1 as soon as possible.
"You may not be ready to start saving for a property yet, but by starting the process, you start the clock ticking."
The pair managed to get into good saving habits during lockdown - cutting back on their monthly date nights and saving cash on petrol saving around £400 a month.
Christopher also left his part-time job at Argos and took up a commission-based role at an energy firm.
It meant Christopher, who now works in a dental practice, earned around £3,000 in three months.
The pair also made around £8,500 from selling Rhiannon's car when she became eligible for one through work.
They also got £3,000 back from a cancelled holiday to Florida.
After spotting their dream home on the market in June 2020, their parents gave them an £8,000 cash gift to help them reach the £19,050 they needed for the deposit.
This, coupled with their savvy saving, meant they were able to get the deposit together in time to move in just a few months later.
They got the keys to their £127,000 first home in Winsford, Cheshire, in August 2020.
We sat down with Christopher to find out how they went from being savers to homeowners for The Sun's My First Home series.
Tell me about your home
It's a two-bedroom semi-detached house in Cheshire.
We have a large living room and a kitchen-diner with French doors leading to our back garden.
We have now built a decking for our garden which is lovely in the summer.
Upstairs, we have one master bedroom, a second bedroom that we use as an office and a bathroom.
There is also a driveway which is big enough to fit two cars.
How did you decide on location?
At the time, I had a work placement through University in Holmes Chapel and Rhiannon was working in Crewe.
Winsford is in the middle so it made sense to live somewhere both of us could commute to easily.
It also has a good connection to the motorway.
Rhiannon and I are both from north Wales, so it's also an easy drive back home to see family.
How much was it?
The house cost £127,000 and we put down a 15% deposit of £19,050.
We took out a mortgage of £107,950 over 20 years at a fixed rate of 1.98%.
Our repayments are around £550 a month - £50 a month cheaper than our rent.
We were previously paying £600 a month in rent for a two-bedroom flat in Manchester.
How did you save for it?
I've always been pretty good with money, and have kept a close eye on our bills since Rhiannon and I moved in together in 2018.
But when Covid hit in 2020, we knew it was a good opportunity for us to start saving for our future.
While we weren't saving for a house specifically when we started out, everything we did save ended up going towards the deposit.
At this point, I was still a student and I was working part-time at Argos - I was doing around 16 hours a week for minimum wage.
I quit this job at the start of the pandemic and took up a side hustle working for an energy firm.
This job required me to recommend services to people and help them to switch.
The work was completely flexible and I could fit it around my studies.
I would get a monthly payment of around £250 and £300, which was made as soon as I signed someone up.
In around three months, I had made between £2,500 and £3,000.
This helped me raise a good portion of the £19,050 deposit we ended up needing for the house.
It was a lot less demanding than working at Argos, and I earned around £1,000 more in the time period.
Lockdown meant we were also saving money on going out.
We weren't able to do our monthly date nights, which would usually set us back around £80 for a pair of theatre tickets or a trip to the cinema and dinner.
We also saved around £300 a month on fuel by not commuting to work and university, and working from home instead.
I also decided not to renew my bus pass, which I used to commute to university, saving £400.
Rhiannon was offered a company car through work, which meant we could sell her old car for £8,500.
We also got £3,000 back from a holiday to Florida which was cancelled because of Covid.
Our parents also helped us financially, contributing around £8,000.
We were very lucky to get this help and we know not everyone is as lucky.
The main reason we got the help was because the sale came about quicker than we had planned and it helped us to secure a better interest rate.
This meant we had enough in our savings to comfortably cover the deposit, as well as solicitors and mortgage broker fees.
Were there any complications?
When we knew we were approaching the end of our degrees, we decided to take out Lifetime Isas (LISAs) with a view to buying a house at some point in the future.
Rhiannon and I both opened an account in September 2019.
We didn't realise that you had to leave it open for at least 12 months before you could withdraw the money for your house and get the bonus.
I think we both must have missed it when looking through the terms and conditions.
With the buying process happening quicker than we expected, we soon realised that we would have to forfeit our government bonus if we wanted to complete on the house in August.
Between us, we had around £500 each in our Lisas - around £1,000 in total.
This means we missed out on about £250 extra towards our deposit.
Do you have any advice for other first-time buyers?
Get a Lifetime ISA - you can essentially get free cash from the government for your home.
But read the small print - it’s easy to forget this when you get such a buzz from going through the house-buying motions.
Make sure you're on top of all your bills - knowing exactly where your money is coming and going from each month is really important.
Also, don't be afraid to ask for help and advice.
It can be a tricky process, but it's worth it in the end.
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