Martin Lewis explains how to turn £1 into free £1,000 for your first home

09 January 2024 , 21:55

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Martin Lewis is the founder of MoneySavingExpert.com (Image: ITV)

Martin Lewis has urged people who are saving for their first home to put just £1 into a Lifetime ISA (LISA) account.

LISAs are a type of savings account where you can put away up to £4,000 each tax year - in return, the Government then pays you a bonus worth 25% of your savings, worth a maximum of £1,000 each tax year. But the catch is, you can only use a LISA to save for your first home or for your retirement.

You need to have your account open for one year before you can use it - which is why Martin suggested depositing even just £1 now, as it gets the ball rolling. Speaking during his Martin Lewis Money Show Live on ITV this evening, Martin said: “You put £1 in… the clock is ticking, then when you want to use it, you can add your money in and because it’s been open a year, you can get the bonus.”

There are some other points you need to be aware of when it comes to LISA accounts. If you’re purchasing a property, it can’t be worth more than £450,000 - this is worth keeping in mind if you’re looking to buy in London when prices are typically valued higher than this.

Martin also urged savers to beware of withdrawing money for any reason other than your first home or retirement. This is because savers who take out money from their LISA for any other reason face a 25% withdrawal penalty which not only wipes out the bonus, but also part of your original savings.

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You must be aged between 18 and 39 to open a LISA, but you can keep saving into your account until you turn 50. If you're in a couple, you can both open a LISA - which means a potential bonus of up to £2,000 each tax year. Martin added that the current top rate of savings for a LISA is Moneybox with 4.25%.

Martin shared a success story from one viewer who used a LISA to purchase their first property last year. The message from the viewer read: "I put £1 in back in 2021/22 when this was mentioned, to activate. Started looking in 2022 and completed beginning of 2023. Thankfully I could use the LISA and I got £1,000 for free. Thank you Martin."

Levi Winchester