Combining a Help to Buy ISA and a Cash ISA

*The Help to Buy: ISA scheme closed to new applicants after 30th November 2019. While you can no longer take out a new Help to Buy: ISA, if you have an existing one, you can pay into it until 2029. For the most up-to-date information, read our guide.

If you have a Help to Buy ISA, you might be wondering whether the funds you’ve saved in it can be combined with other investments you might have, such as a cash ISA.

In this guide, you’ll find the answer to this question, learn what all of your options are and find out how the right mortgage broker can help you make your ISA funds go further.

Can you have a cash ISA and a Help to Buy ISA at the same time?

It depends on when you opened it and its value. Some banks and building societies allow you to open both within the same tax year so long as it’s through them. However, if you cannot do this and opened a Help to Buy: ISA before it closed to new applicants, you can apply for a cash ISA the following tax year.

Split Help to Buy ISA

If you want to open a Help to Buy ISA but you’ve already opened a cash ISA in the same year, all is not lost: plenty of banks have gotten around the problem by offering a hybrid or split Help to Buy ISA, which can be used to combine Help to Buy ISAs with your existing savings by placing them in one single ‘wrapper’.

By opening one of these split ISA Help to Buy accounts, you’ll have the option of linking your existing savings to the new account, and transferring the funds across, effectively creating a single account for your deposit fund. This may result in lower interest rates than you’d been enjoying from your ‘old’ ISA, but this will be more than compensated by the 25% bonus you’ll receive through Help to Buy.

It’s also worth being aware that if the sum in your ‘standard’ ISA amounts to £1,200 or less, you won’t need to open a split ISA Help to Buy account: you can simply transfer the money into any Help to Buy ISA.

Help to Buy ISA plus a stocks and shares ISA

Yes, you can open a Help to Buy ISA with a stocks and shares ISA from any year. In fact, opening an ISA of this type is another solution to consider if you have already opened or paid into a cash ISA and wish to open a Help to Buy ISA in the same tax year, as Stocks and Shares are not subject to the same tax benefits.

Help to Buy ISA vs cash ISA

The government contribution makes the Help to Buy ISA a much more generous proposition than standard savings account or ISA, especially while interest rates are low. However, bear in mind that come 30th November 2019, new applicants will no longer be accepted.

There are numerous Help to Buy ISAs available on the market, and most major high street banks and building societies currently offer them with rates of up to 2.58% tax free interest up for grabs.

You are free to take your money out of a Help to Buy ISA at any time and are not committed to putting it into a property deposit should your plans change and you decide to spend or invest it elsewhere. However, you will only be able to claim the 25% bonus when you use it for a mortgage deposit as intended, and are able to demonstrate through your solicitor that you have done so.

If you’re interested in taking out a Help to Buy ISA before the scheme closes, make an enquiry and we’ll match you with an expert shortly.

Help to Buy ISAs closing: What you need to know

As of 30th November 2019, Help to Buy ISAs will be closing to new applicants.

New applicants can still apply for a Help to Buy ISA before this date, and the benefits will still be the same even once the scheme ends. After this date, existing applicants will still be able to access and pay into their Help to Buy accounts.

Alternatively, existing members can transfer up to £4,000 of their Help to Buy ISA funds into a Lifetime ISA. For more information about transferring your funds, speak to an expert. They’ll be able to talk you through your options and see what’s best for you.

Can you have a junior ISA and a Help to Buy ISA?

We often hear from customers who want to know whether you can have a junior ISA and a Help to Buy ISA if you’re aged between 16 and 17. The answer is yes, but the Help to Buy ISA holder will need to open the account in their own name – a parent or guardian cannot do this on their behalf.

Can I have a Help to Buy ISA and a savings account?

Yes, there are no rules against this. Indeed, you might need to open a savings account if you’ve filled up your Help to Buy ISA and still need to save up more capital for the deposit.

Can my portfolio ISA include a Help to Buy ISA?

Yes, some ISA managers offer portfolio ISAs which allow you to hold multiple products in a single wrapper, one of which can be a Help to Buy ISA. The standard allowance limits will still apply.

Getting the best Help to Buy mortgage

As mentioned previously there is no restriction on mortgage providers with a Help to Buy ISA, so once you have your deposit ready, you can approach any lender for a mortgage offer. There are a number of factors to bear in mind when applying for your first mortgage:

What deposit will I need?

Most mortgage providers will lend up to 95% of the value of the property, meaning you will need to contribute at least a 5% deposit, and in many cases 10%, 15% or as much as 25% depending on a number of factors relating to the lender’s perception of risk. Typically, the higher your overall risk profile as a borrower (if you have a lot of bad credit or are buying a non-standard property for example), the higher the deposit is likely to be.

Don’t forget that if you choose to put down a larger deposit your interest rate and monthly payments are likely to be lower, which is another reason why that extra 25% can make a big difference to the mortgage deal you could secure. Also keep in mind that the ISA can be used in conjunction with a Help to Buy equity loan.

How much you could borrow

Lenders all have slightly different approaches when it comes to working out how much you can afford to borrow, but most will lend 4.5 times your salary, some will offer 5 times and a handful will go up to 6 times your annual earnings in the right circumstances.

While this is a helpful rule of thumb, it’s worth speaking to an expert to find out what this means for you, because each lender has its own policy on what can be counted as a ‘salary’.