Lifetime ISA (LISA)
The Lifetime ISA is the most widely useful scheme for first-time buyers who are saving for a deposit. You can open one if you're aged 18–39, save up to £4,000 per tax year, and the government adds a 25% bonus — up to £1,000 per year. On a full £4,000 annual contribution, your pot grows to £5,000 before any investment returns.
To use a LISA for property, the purchase price must be £450,000 or less, it must be your first home, and you must have held the account for at least 12 months before completion. You can hold either a cash LISA or a stocks and shares LISA — the latter gives potential for higher returns but the value can fall.
- ▸Who it suits: Anyone aged 18–39 buying their first home for up to £450,000, especially if you're 2+ years from buying
- ▸Annual bonus: 25% on contributions up to £4,000/year — maximum £1,000/year from government
- ▸Property cap: £450,000 — properties above this mean you lose the bonus entirely
- ▸Minimum holding period: 12 months before you can use it for a property purchase
Help to Buy ISA (Legacy Scheme — Existing Holders Only)
The Help to Buy ISA closed to new applicants in November 2019, but if you already hold one you can continue saving until November 2029 and claim the bonus until November 2030.
The bonus was 25% on savings, with a maximum £3,000 bonus on £12,000 of savings. The property price cap was £250,000 outside London and £450,000 in London. Crucially, the bonus was paid on completion — not at exchange — which caused problems for some buyers who exchanged expecting it.
Shared Ownership
Shared Ownership lets you buy a share of a property — between 10% and 75% — and pay subsidised rent to the housing association on the portion you don't own. Over time you can 'staircase' your ownership upward, including in 1% annual increments under the 2021 reforms.
To be eligible you must be a first-time buyer (or a former owner who can no longer afford to buy outright) with a household income of £80,000 or less (£90,000 in London). Properties are typically new builds from housing associations, or resale shared ownership homes.
The key costs beyond the mortgage: service charges (which can be substantial on new build developments, often £150–£400/month), buildings insurance (covered by the landlord), and legal fees each time you staircase. Subsidised rent is typically around 2.75% of the unsold equity value per year.
- ▸Who it suits: Buyers in high-cost areas where outright purchase is unaffordable, who plan to staircase over time
- ▸Minimum share: 10% under current rules (was 25% before 2021 reforms)
- ▸Service charges: Budget carefully — service charges on new build shared ownership can rival a second mortgage payment
- ▸Exit strategy: Selling before reaching 100% is possible but more complex than selling a freehold property outright
First Homes Scheme
First Homes offers new build properties at a minimum 30% discount to first-time buyers — with some developments offering 40% or 50% off. The discount is permanent: when you sell, the same percentage discount passes to the next eligible buyer, keeping the homes affordable in perpetuity.
Eligibility requires being a first-time buyer with a household income under £80,000 (£90,000 in London). After applying the discount, the purchase price must not exceed £250,000 outside London or £420,000 in London. Local authorities can layer on additional restrictions — for example, reserving properties for key workers or people with a local connection.
- ▸Discount: Minimum 30% off market value — permanent, not a loan
- ▸Property cap: £250,000 after discount outside London, £420,000 in London
- ▸Income cap: £80,000 household income (£90,000 London)
- ▸Availability: New builds only, allocated by developers — supply is limited and varies significantly by area
Mortgage Guarantee Scheme
The Mortgage Guarantee Scheme allows buyers to purchase with a 5% deposit. The government partially guarantees the lender's exposure on the portion between 80% and 95% LTV, which encourages lenders to offer 95% LTV mortgages who might otherwise not.
The scheme is available to first-time buyers and home movers on properties up to £600,000. It is not exclusive to first-time buyers. Check current availability — the scheme has been extended several times since its 2021 launch and terms may have changed.
Which Scheme to Prioritise
For most first-time buyers, the decision is straightforward: open a Lifetime ISA as early as possible, even if you're not buying for several years. The annual bonus compounds over time and you lose nothing by starting early (subject to the 12-month minimum holding period).
If you're in an area where properties routinely exceed £450,000 — much of London, parts of the South East — the LISA bonus is inaccessible for property and the scheme is better used for retirement. In that case, consider whether Shared Ownership is viable, or focus on maximising your ISA allowance in a standard cash or stocks and shares ISA instead.
| Scheme | Best for | Key limit |
|---|---|---|
| Lifetime ISA | Saving for a deposit over 2+ years | Property must cost ≤ £450,000 |
| Shared Ownership | High-cost areas where outright purchase is unaffordable | Complexity, service charges, resale restrictions |
| First Homes | Buyers who find an eligible new build development | Limited supply, new builds only |
| Mortgage Guarantee | Buyers with a small deposit ready to buy now | Higher interest rates at 95% LTV |
Key Takeaways
- ✓Open a Lifetime ISA as early as possible — the 25% government bonus applies from day one and the 12-month minimum holding period starts immediately
- ✓The LISA £450,000 property cap rules it out for much of London — check your target area's price range before relying on it
- ✓Shared Ownership is more complex than it appears — service charges, repair obligations, and resale restrictions need careful evaluation
- ✓First Homes offers a genuine permanent discount but supply is limited and restricted to new builds
- ✓If you hold both a LISA and a Help to Buy ISA, you can only use one for the property purchase bonus