Saving for Your First Home in the UK: LISA, ISA, and Stamp Duty Explained

The minimum deposit for most UK mortgages is five percent of the property's purchase price. On a £250,000 home, that is £12,500. However, a ten percent deposit (£25,000 on the same property) gives you access to significantly better mortgage rates, and a fifteen to twenty percent deposit opens up the most competitive deals on the market. The difference in monthly repayments between a 95 percent and 80 percent mortgage can be hundreds of pounds — so if you can save a larger deposit, the long-term saving is substantial. Beyond the deposit, first-time buyers also need to budget for: solicitor's fees (£1,000 to £2,000), survey costs (£400 to £1,500 depending on type), mortgage arrangement fees (sometimes included in the rate, sometimes £500 to £1,000 upfront), removal costs, and initial furnishing and decoration. Add these up alongside your deposit target to understand your true savings goal.

The Lifetime ISA (LISA) is one of the most generous savings products available to UK first-time buyers. You can save up to £4,000 per year in a LISA, and the government adds a 25 percent bonus — up to £1,000 per year — on top of your contributions. Over five years of maximum contributions, that is £20,000 from you and £5,000 free from the government. The LISA can be used toward a first home worth up to £450,000 or withdrawn from age 60 for retirement. Eligibility: you must be aged 18 to 39 when you open the account. Contributions can continue until age 50. The account must be open for at least 12 months before using it for a property purchase. A withdrawal penalty (25 percent of the withdrawal, effectively clawing back the bonus plus a portion of your own savings) applies if you withdraw for any reason other than buying a first home or after age 60 — so only use a LISA money you are definitely saving for these purposes.

First-time buyers in England receive a Stamp Duty Land Tax (SDLT) relief. From April 2025, the first-time buyer relief was adjusted: you pay no SDLT on properties up to £300,000, and a reduced rate (5 percent) on the portion between £300,001 and £500,000. On properties above £500,000, standard SDLT rates apply from the outset. Check the current rates on GOV.UK as SDLT thresholds are reviewed periodically. In Scotland, Land and Buildings Transaction Tax (LBTT) applies instead, with a first-time buyer relief. Wales uses Land Transaction Tax (LTT). Beyond SDLT, factor in the Help to Buy equity loan scheme if available in your area, mortgage broker fees, and potential leasehold ground rent or service charges on leasehold properties. First-time buyer schemes like shared ownership are also worth exploring if a full purchase is out of reach — you buy a share of a property and pay rent on the remainder, with the option to buy more shares later.