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Combining a Help to buy ISA and a cash ISA

Can you have a Help to Buy ISA and a cash ISA? Find out here.

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 28th August 2019 *

We often take queries from customers wanting to know if they can combine a Help to Buy ISA with another savings product such as a cash ISA or a stocks and shares ISA.

As a first-time buyer, you’ll want to ensure your budget will stretch as far as possible, and the rules are not always easy to get to grips with. And with Help to Buy ISAs closing on 30th November 2019, now is the best time to get up to speed with your accounts.

The good news is that the advisors we work with are experts when it comes to Help to Buy ISAs, and can discuss your options with you in-depth.

In this article we will cover:

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

The answer is not always straightforward, because it will depend not only on the type of ISA you already have, but when you opened it and how much is in it.

The rules state that you cannot open Help to Buy ISA and a cash ISA in the same year. However, if you have an existing cash ISA which you opened in a previous year, this will not prevent you from opening a Help to Buy ISA in a subsequent one.

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 a 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 x your salary, some will offer 5 x and a handful will go up to 6 x 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’.

Redeeming your Help to Buy ISA with an existing ISA

If you’re using a Help to Buy ISA and an existing cash ISA to boost your mortgage application, make your solicitor or conveyancer aware as soon as possible so this doesn’t delay completion.

You will need to instruct them to apply for your government bonus, which will be added to the funds you’re putting towards your first home - the bonus must be included with any capital consolidated at the completion of the transaction.

Speak to an expert on Help to Buy ISAs today!

If you like anything in this article or you’d like to know more, call us on 0808 189 2301 or make an enquiry here.

Updated: 28th August 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Find out more about the Help To Buy ISA

Help To Buy ISA