Mortgage Deposits Explained
Updated: Oct 29
Buying a home is an exciting step, but working out how much you need to save for a mortgage deposit can feel daunting, particularly if you're a first-time buyer.
The good news is that you don't always need a huge deposit to get started. For many residential mortgages, a 5% deposit may be enough, although the amount you'll need depends on the property price, the lender and your circumstances.
In this guide, we'll explain how much mortgage deposit you might need, how your deposit affects your mortgage options, how family can help and the different ways you could save towards your first home.
What is a mortgage deposit and why is it required?
When purchasing a property, it is highly probable that you will require a mortgage. To obtain a mortgage, a deposit is typically necessary. Lenders will not only evaluate your creditworthiness but also ask for a deposit which serves as a form of security for your loan.
Your mortgage deposit is the amount of the property's purchase price that you contribute yourself, with the remaining amount usually covered by your mortgage.
For example, if you're buying a property for £250,000 and have a £25,000 deposit, you'll need a mortgage of £225,000, assuming the lender accepts the purchase price and your application.
Your deposit also affects your loan-to-value ratio (LTV). This is the percentage of the property's value you're borrowing. In this example, your mortgage would be at 90% LTV.
Understanding your deposit and LTV can help you see how much you may need to borrow and which mortgage options could be available to you.
How much mortgage deposit do I need?
Ensuring you have the minimum deposit required is essential. However, the more you can put down, the more lenders you will have to choose from and the better interest rate you can secure.
For many buyers, a 5% mortgage deposit is a starting point, although some lenders and property types may require a larger deposit. The minimum deposit you'll need will depend on the mortgage product, the property you're buying and your personal circumstances.
A larger deposit can give you access to a wider choice of mortgage deals and may help you secure a lower interest rate. This is because you'll generally need to borrow a smaller percentage of the property's value.
It's worth comparing the potential benefits of saving a little longer with the cost of continuing to rent. A mortgage adviser can help you understand what may be achievable with your current deposit and whether waiting to save more could make a difference.
Although one or two lenders have come forward with mortgages where less than 5% deposit is an option, in most cases a minimum deposit equal to 5% of the property price is needed. For example, if you are looking to buy a £200,000 property, you will need to put down £10,000, which is 5% of the property's value. In this scenario, you would require a mortgage of £190,000, therefore with a Loan to Value (LTV) of 95%.
If you are fortunate enough to have a 40% deposit (£80,000), you would only need a mortgage of £120,000, resulting in a 60% LTV. With a larger deposit, you will have more options when it comes to lenders and it is likely that you will secure better mortgage terms, such as a lower interest rate.
It is also worth keeping in mind that different lenders have different requirements, and some may offer more favourable rates based on your financial circumstances. For example, if you have a good credit score and a stable income, some lenders may accept a smaller deposit than if you have a lower credit score or irregular income.
Lastly, it is important to factor in other costs associated with buying a home, such as stamp duty, legal fees, and survey costs. These costs can add up quickly, so it is important to have a clear understanding of your budget before you start house hunting.
Can family help with my deposit?
Yes, most lenders are willing to accept financial assistance from family members for your deposit, and in some cases, from friends as well.
One option is a gifted deposit for a mortgage, where a family member, often a parent, gives you money towards your property purchase. This can be particularly helpful for first-time buyers who have saved some money but need a little extra to reach their target deposit.
Lenders will usually want to establish where the money has come from and whether it is a genuine gift or a loan that must be repaid. They may ask for a gifted deposit letter and supporting evidence, and the person providing the money may need to complete additional checks.
Some lenders also offer family-assisted mortgage options, where a family member provides savings or property as security rather than handing over money for the deposit. The arrangements and risks vary, so it's important to understand the terms before deciding which option is right for you.
However, there are important considerations that should be kept in mind before a family member or friend agrees to assist you, such as:
1) They need to decide whether they will be providing the money as a non-repayable gift, with no expectation of any co-ownership or interest in your property.
2) They may also want to consider securing their investment by putting a legal charge on your property.
3) Rather than use some of their savings would they prefer to put up their own property as security for your deposit? In this instance no deposit exchanges hands, the lender simply takes a charge over their home until such time you can repay them.
Whichever route you choose, it is crucial that you communicate these details to your mortgage adviser (or directly to your bank) right from the beginning. Failure to do so could potentially lead to complications or delays further down the line.
Can you get a mortgage without a deposit?
Saving a house deposit can take time, so it's understandable to wonder whether you can get a mortgage without one.
Although most mortgages require a deposit, some lenders offer 100% mortgages, which means you may be able to buy a property without putting down a traditional cash deposit. These products are limited and usually have specific eligibility criteria, which may include requirements around your rental payment history, income and credit record.
There may also be alternative routes to explore. For example, a concessionary purchase mortgage may be an option if you're buying a property from a family member at a discount, while certain family-assisted mortgages may allow a relative to provide additional security.
These options aren't suitable for everyone, and a no-deposit mortgage can carry risks, including the possibility of negative equity if property values fall. It's worth speaking to a mortgage adviser to understand which options, if any, are available for your circumstances.
What is the best way to save for a Deposit?
Saving for your first home doesn't have to happen all at once. Setting a realistic savings target and building a regular habit can help you work towards your mortgage deposit at a pace that suits your finances.
Start by working out how much deposit you may need based on the type of property you're hoping to buy. Then look at what you can comfortably put aside each month, while allowing for everyday expenses and unexpected costs.
If you're a first-time buyer, a Lifetime ISA (LISA) may also be worth considering. Eligible savers can receive a government bonus on qualifying savings used towards their first home, subject to the account rules and property purchase conditions.
Anyone aged 18 and above can open a LISA and contribute up to £4,000 per year. The government adds a 25% bonus to your savings at the end of each tax year, meaning your money grows faster. For example, imagine saving £250 per month. In just one year, you will have saved a total of £3,000, which will earn you a bonus of £750. It is important to note that there are limitations on withdrawals if you plan to use the funds for anything other than purchasing your first home before turning 60.
Other practical steps include setting up a regular savings transfer on payday, reviewing non-essential spending and keeping your deposit savings separate from your everyday money. Small, consistent contributions can build up over time.
If you can buy with someone else, your journey to homeownership may be even shorter as you can combine your savings to boost your deposit. And remember, as little as 5% of the purchase price is enough to qualify for a traditional mortgage. Take control of your future and start saving for your first home with the help of the LISA. It is a smart and reliable way to make your homeownership dreams a reality.
Lastly, maximise your savings whilst you are in a good position to do so, some basic tips to help you:
Seize the Opportunity: While enjoying life at home during your younger years, you can also rapidly grow your savings. Imagine how much easier it would have been for those of us who grew up in the 70's and 80's if we had listened to our parents and saved half of our monthly wages. Start by setting up a standing order on payday to put aside a fixed amount in a dedicated savings account. Remember, if you do not have it, you will not spend it!
Gain Confidence in Mortgages: Consult a mortgage adviser to determine your potential monthly mortgage payments. Then, aim to save that exact amount every month. By doing so, you will not only see your savings grow rapidly but also enjoy peace of mind, knowing you can comfortably afford your mortgage going forward.
Polish up Your Spending: Cut back on unnecessary expenses whenever possible. Instead of regular nights out in town, consider hosting get togethers in the comfort of your own surroundings. Instead of purchasing clothes for that special occasion maybe you should consider renting them? Statistics show that we typically wear these items only three times before they end up forgotten at the back of our wardrobes!
Say No to Debt: Minimise additional debts whenever you can. Not only could this impact your ability to afford a mortgage, but it could also hinder your progress in saving for your deposit.
My deposit is not a problem, but can I borrow more with a Joint Borrower Sole Proprietor Mortgage?
If you've saved a deposit but find that your income limits how much you can borrow, a Joint Borrower Sole Proprietor (JBSP) mortgage may be worth exploring.
This type of mortgage allows another person, often a family member, to join the mortgage application and have their income considered alongside yours, subject to the lender's affordability checks. The other person doesn't usually become a legal owner of the property simply by joining the mortgage, although they will have legal responsibility for the borrowing.
A JBSP mortgage could help some buyers explore properties that might otherwise be outside their borrowing range. However, the lender will assess everyone's circumstances, and the additional borrower needs to understand their ongoing financial commitment.
It's important to consider whether the mortgage will remain affordable over the longer term and discuss any future plans for removing the additional borrower with your adviser.
When do I pay my deposit?
It's important to plan not only how much mortgage deposit you'll need, but also when the money must be available during the house-buying process.
Your solicitor or conveyancer will explain when your deposit needs to be transferred. For many purchases, the exchange deposit is paid when contracts are exchanged, before completion. The amount and arrangements can vary depending on the transaction, so make sure you understand what is required and only transfer funds using verified payment instructions from your solicitor.
To sum up, a mortgage deposit is a form of security for your lender as they take on the responsibility of lending you money to buy a house. Depending on your financial situation and existing commitments, family members may be able to help with your deposit which is a wonderful way to shorten the time it takes to save your own funds. Building up your deposit can also be achieved by cutting back on basic spending and making some additional sacrifices.
Lastly, knowing when it is necessary to make your deposit payment will avoid any surprises at the tail end of the process. All-in-all, this process may seem daunting but it need not be difficult if good advice is sought from a mortgage adviser – and we are here to provide you with that expertise. We can discuss current schemes that make buying a house easier or offer advice on budgeting for future goals like owning property.
Are you ready to take your first step towards home ownership?
Have you saved a deposit and ready to buy? If so,
Frequently Asked Questions About Mortgage Deposits
How much deposit do I need for a £200,000 house?
A 5% deposit on a £200,000 property would be £10,000, while a 10% deposit would be £20,000. The minimum you'll need depends on the lender, the property and your individual circumstances.
Does a bigger mortgage deposit mean a lower interest rate?
A larger deposit can improve your choice of mortgage deals and may give you access to lower interest rates because you'll be borrowing a smaller percentage of the property's value. However, the rate available will also depend on the lender's criteria and your financial circumstances.
Can I use a gifted deposit to buy my first home?
Yes, some lenders accept gifted deposits, often from close family members. You'll normally need to provide evidence of where the money came from and confirm whether it is a gift rather than a loan. The lender's requirements will determine what documentation is needed.Your home may be repossessed if you do not keep up repayments on your mortgage.
Written and Published: 24 August 2023 | Last updated: 29 October 2026 by Adrian Collins, Founder of Beechwood Mortgages (FCA Ref: 219335). Reviewed and Approved by Stonebridge Mortgage Solutions Limited, which is authorised and regulated by the Financial Conduct Authority (FCA Ref: 454811).
