A Full Guide to Help to Buy ISAs and Other ISA Options

Please note: You can no longer apply for a Help to Buy ISA, as the scheme closed to new applicants in November 2019. However, if you’re an existing account holder, you can still save into it and claim the government bonus. 

For those who missed out, there are other alternatives, such as the Lifetime ISA, which might be worth considering. Check other guides for more information on alternatives.

If you’re a first-time buyer in the UK, all the savings options – especially ISAs – can feel a bit overwhelming. 

You’ve probably come across Help to Buy ISAs, Cash ISAs, Lifetime ISAs, and maybe even Stocks and Shares ISAs. 

But how do they work together, and how can they help you buy your first home?

In this guide, we’ll keep things simple. 

We’ll explain how you can combine different ISAs, compare Help to Buy ISAs with other types, and give you some practical mortgage tips. 

Let’s get started!

What is a Help to Buy ISA?

A Help to Buy ISA is a savings account designed for first-time homebuyers. It comes with a great perk: a 25% bonus from the government on whatever you save. 

For every £1,000 you put in, the government adds £250, up to a maximum bonus of £3,000.

Now, if you didn’t open one before November 2019, unfortunately, the scheme’s closed to new applicants. 

But for those who did, you can keep adding to your savings until 2029 and claim the bonus as late as 2030.

This account was designed with your first home in mind – it’s for properties up to £250,000 outside London or £450,000 within London. 

And it’s strictly for your main home, so it won’t cover holiday homes or rental properties.

And here’s a bonus – if you already have other types of ISAs, like a Cash ISA or a Stocks and Shares ISA, you can still use them alongside the Help to Buy ISA. 

This way, you can build up your savings pot more efficiently.

How Does a Help to Buy ISA Work?

If you were one of the lucky ones who got a Help to Buy ISA before the deadline, here’s how it works to get you closer to your first home. 

It’s like a regular ISA, but with a nice bonus at the end if you use it for buying a house. 

You can save up to £200 per month, which will keep building your bonus until you’re ready to buy.

When the time comes to purchase, your solicitor will handle applying for the government bonus – you don’t have to worry about the paperwork! Just make sure your chosen property fits the price limits (£250,000 or under, or up to £450,000 in London).

And if you’ve got another ISA with less than £1,200 in savings, you can transfer it straight into your Help to Buy ISA to give your balance a boost.

Can You Combine Different Types of ISAs?

One of the biggest questions first-time buyers have is whether they can combine different types of ISAs to boost their savings.

The answer is, in many cases, yes, but it comes with some conditions. Let’s break it down.

If you already have a Help to Buy ISA, you might be wondering if it can be combined with a Cash ISA or even a Stocks and Shares ISA. 

The good news is that it can, and it could help you boost your deposit faster. 

Some banks offer hybrid or split ISAs that allow you to hold both a Cash ISA and a Help to Buy ISA within one account, which means you can take advantage of the benefits of both. 

Even if your bank doesn’t offer a hybrid ISA, you can still hold both separately, though there may be annual limits to how much you can contribute.

For instance, if you had a Cash ISA and later opened a Help to Buy ISA before the scheme closed in November 2019, you can keep contributing to both. 

It’s also worth noting that some ISA managers offer portfolio ISAs that allow you to combine multiple products, such as a Stocks and Shares ISA alongside your Help to Buy ISA, within a single wrapper. 

This can make managing your savings a bit easier.

Can You Combine a Help to Buy ISA with an ISA Mortgage?

If you’re considering an ISA mortgage – where you save in an ISA, like a Cash ISA or Stocks and Shares ISA, to pay off the mortgage at the end – you might wonder if you can add your Help to Buy ISA to the plan. 

The answer is yes, you can use your Help to Buy ISA towards your deposit. 

But here’s the thing: a Help to Buy ISA is designed to help you build up a deposit, not pay off the entire mortgage like some other ISAs might.

So, while the Help to Buy ISA can give your deposit a boost, it won’t cover the full mortgage repayment. 

Some banks offer “portfolio ISAs,” where you can hold different ISAs together in one account, so you could have a Help to Buy ISA alongside other types. 

But keep in mind, the Help to Buy ISAs main job is to help you with that initial deposit.

How Does a Help to Buy ISA Compare to Other ISAs?

Let’s look at the other types of ISAs you might consider.

Help to Buy ISA vs. Lifetime ISA

A Help to Buy ISA gives you a 25% bonus, but it’s now closed to new applicants. If you missed out, a Lifetime ISA (LISA) could be a good alternative. 

Like the Help to Buy ISA, the LISA also offers a 25% government bonus. You can save up to £4,000 per year in a LISA, and the bonus can be used for your first home or for retirement. This makes it more flexible. 

You can even transfer up to £4,000 from a Help to Buy ISA to a LISA if you want to keep earning the bonus.

Help to Buy ISA vs. Stocks and Shares ISA

A Stocks and Shares ISA might suit you if you want to grow your savings through investments. 

Unlike Cash ISAs or Help to Buy ISAs, a Stocks and Shares ISA invests in the stock market, which means higher risk but also the potential for higher returns.

If you’re comfortable with some risk and have time on your side, this might be a good option.

Help to Buy ISA vs. Junior ISA

If you’re aged 16 or 17, you can hold both a Junior ISA and a Help to Buy ISA at the same time. 

Just remember that the Help to Buy ISA must be in your name – your parents can’t open it for you.

Each type of ISA has its own benefits and limitations. The best choice will depend on your goals, how soon you want to buy, and how much risk you’re comfortable with. 

If you’re planning to buy your first home soon, using a Help to Buy ISA alongside a Lifetime ISA might work well for you, if you qualify.

How Do I Claim the Government Bonus?

Claiming the bonus is pretty straightforward but does require some coordination. 

When you’re ready to buy your home, you’ll need to let your solicitor or conveyancer know you’re using a Help to Buy ISA. 

They’ll handle the application for the bonus, which gets added to your deposit when it’s time to complete the purchase.

Remember, the government bonus can only be used for your deposit – not for other costs like legal fees or furniture.

What If I Want to Use My Help to Buy ISA for a Buy to Let Property?

If you’re thinking about using your Help to Buy ISA to get into the buy-to-let market, we hate to break it to you, but the government has put a firm “no” on that. 

The Help to Buy ISA is strictly for first-time buyers purchasing a home they intend to live in – not for investment purposes. 

It makes sense, though; the whole idea behind it is to give first-time buyers a boost, not to fund a rental empire.

That being said, once you’ve used your bonus and bought your first home, there’s nothing stopping you from buying a buy-to-let property later down the line. 

But as far as the Help to Buy ISA goes, it’s all about getting you a home to call your own.

Mortgage Advice for First-Time Buyers

Buying your first home can feel overwhelming, but with the right advice, you’ll feel more confident about the process. 

Let’s start with the basics: your deposit. 

In the UK, most mortgage lenders ask for a deposit of at least 5%, though some may require 10%, 15%, or more, depending on your situation.

If you’re saving for a deposit, ISAs can give you a helpful boost. 

With a Help to Buy ISA or a Lifetime ISA, you can earn a 25% bonus from the government, bringing you closer to your deposit goal. 

You can also use other savings, like a Cash ISA, and combine funds to make your deposit as strong as possible. 

A larger deposit can help you get a better mortgage deal, as lenders see you as a lower risk.

When choosing a mortgage, think about whether you want a fixed or variable rate. 

A fixed-rate mortgage means your monthly payments stay the same, offering stability – which many first-time buyers prefer. 

A variable-rate mortgage can start with lower rates but may change over time, which might be less predictable.

It’s also worth speaking to a qualified mortgage broker. They can guide you, especially if you’re using multiple ISAs, and help you find the best rates and terms for your situation.

Is It Still Worth Keeping My Help to Buy ISA?

If you’ve got a Help to Buy ISA and are still adding to it, it’s likely worth holding onto, especially if you’re thinking of buying a home in the next few years. 

That 25% government bonus is a solid boost – you won’t get that kind of return from a regular savings account.

If buying a home is still a bit further away and you need more flexibility, you might consider a Lifetime ISA. 

This option also gives you a government bonus and works well for long-term savings. But be aware, there are penalties if you withdraw early and don’t use it for a home or retirement. So, make sure it fits your plans before switching.

If you’ve already maxed out your Help to Buy ISA, you could open a regular savings account to keep building up your deposit.

The Bottom Line

Using different types of ISAs, getting those government bonuses, and having a clear savings plan can make buying your first home easier. 

Whether you’re using a Help to Buy ISA, a Lifetime ISA, or a mix of savings accounts, the goal is simple: build up your deposit and find the best mortgage deal you can. 

The more you save, the better your options will be, and there are plenty of ways to make your money work harder for you.

If all the options feel overwhelming, don’t hesitate to speak to a mortgage broker or financial advisor. 

They can help you understand your choices and create a plan that works for you. 

Get in touch with us and we’ll match you with the right mortgage broker who can help with your mortgage needs.