How much do you need for a deposit on a house?

Dreaming of getting on the property ladder? If you’re thinking of buying a home, you usually need to put down a deposit to get a mortgage. Read our guide to find out how much you might need to save for a house deposit.

What is a mortgage deposit?

A mortgage deposit is a cash lump sum you put towards buying a property. You then apply for a mortgage (a type of loan) for the remaining amount.

How does a mortgage deposit work?

You can’t usually borrow the full amount to buy a property. So, you’ll need a mortgage deposit to make up the difference between the price of the property and the mortgage.

For example, if you get a mortgage for 90% of the property price, your deposit will be 10%. On a £250,000 property, your deposit would be £25,000 (10% of £250,000) and the mortgage would be £225,000 (90% of £250,000).

What is the minimum deposit for a mortgage?

Generally, the minimum mortgage deposit is 5% of the purchase price. So, the higher the property value, the more you need to save:

With a 5% deposit, you need a 95% loan-to-value (LTV) mortgage. The loan-to-value percentage just tells you how much of the property value you’re borrowing.

How much deposit should you put down?

In most cases, the bigger your deposit, the better as your mortgage repayments will be smaller and there will be less interest to pay.

However, a small deposit will take less time to save meaning you can buy a property sooner – this might be attractive if you feel you’re wasting money on rent.

What are the benefits of having a larger deposit?

The advantages of a larger deposit include:

• More mortgage options. You’ll have a greater choice of deals and lenders.
• Cheaper interest rates. You’re more likely to be able to access cheaper interest rates.
• Better chance of getting a mortgage. You’ll be borrowing less so you’re more likely to pass the affordability checks.
• Smaller repayments. Your monthly repayments will be smaller if you’re borrowing less.
• Less risk of negative equity. You’ll have a bigger buffer to protect you if house prices fall. If the price of your home falls below the amount you owe on your mortgage, this is known as being in negative equity. Negative equity is undesirable because it makes it hard to move or sell your house as you won’t make enough money from the sale to pay off your mortgage.

What is the average first-time buyer deposit for a house in the UK?

The average first-time deposit varies depending on where you live in the UK. Where properties are cheaper, average deposits are lower. Typically, first-time buyers put down 19% of a property’s value, but this figure can vary enormously from buyer to buyer.

What deposit do I need to get lower mortgage interest rates?

The lowest mortgage interest rates are usually for 60% loan-to-value (LTV) mortgages. For these you’ll need a deposit of at least 40%. But even a 10% deposit will unlock better deals than a 5% deposit. And if you can afford a 20% or 25% deposit so much the better.

How much can I borrow on a mortgage?

This depends on your and any joint borrower’s personal circumstances.

As well as a credit check, a mortgage lender will carry out an affordability assessment to decide how much they’re happy to lend. The affordability check looks at your income, outgoings and debts, such as credit card balances. They’ll also check you could afford the repayments if interest rates were to rise.

There are online calculators that can give you a rough idea of how much you might be able to borrow. For a clearer idea, apply online for an Agreement in Principle from a lender. This takes less than an hour, your credit score won’t be affected and it doesn’t tie you to that lender.

Can I get a no-deposit (100%) mortgage?

No-deposit home loans have all but disappeared from the market.

Nowadays, the only mortgages without a deposit are usually guarantor mortgages for first-time buyers. These require a family member or friend to use their own savings or property as security against the loan. And you’ll still need enough money to cover upfront costs such as valuation and legal fees.

There are alternatives to a 100% mortgage, such as government schemes to help people buy a home. It’s often a good idea to speak to a mortgage broker to discuss your options.

Can my parents contribute towards my deposit?

Yes, but you must let your lender and solicitor know if all or part of your deposit has been given to you. Your parents (or whoever has contributed to the deposit) will have to confirm in writing that they don’t want the money back.

Who do I pay my mortgage deposit to?

You pay your deposit to the solicitor or conveyancer who is handling the property purchase for you. They transfer this and your mortgage money to the seller’s solicitor on your behalf.

How to save for a mortgage deposit

If you’re thinking of saving for a mortgage deposit, here’s how to get started:

1. Open a savings account. To get the best rates, consider an account where your money is locked away for a set period.
2. Set up a standing order. Choose a date shortly after pay-day to automatically transfer money into your savings account.
3. Choose a realistic savings amount. Review the amount if your income changes.
4. Do a budget. Look for areas where you could cut down on spending and ways you could increase your income.

What extra costs are there when buying a property?

You’ll need some money set aside to cover a range of extra costs including:

• Mortgage arrangement fees
• Legal fees
• Valuation and survey fees
• Stamp duty
• Mortgage broker fees (unless they’re paid by commission from the lender)
• Removal costs

How much deposit do I need to buy a house if I have bad credit?

If your credit history is less than perfect, you might need to put down a larger deposit of at least 20–25%. This is because lenders might see you as a higher risk.

How much deposit do I need for a buy-to-let mortgage?

If you’re thinking of getting a buy-to-let mortgage, you’ll usually need a deposit of at least 20–25% of the property value.

How much deposit do you need to buy a new-build house?

You may be able to find some mortgages that only require a 5–10% deposit. But you’ll have more choice if you can save a bigger deposit.

You could buy through the Deposit Unlock scheme which lets qualifying first-time buyers and home-movers buy new-build properties with a 5% deposit.

Can you buy a house with a 5% deposit?

There are mortgages you can get with a 5% deposit, but you may need to put down more to make the mortgage affordable. This is because the smaller your deposit, the more you’ll need to borrow and the higher your mortgage repayments will be.

Is £10,000 enough for a house deposit?

If you’re able to get a 95% mortgage, you could buy a house worth £200,000 with a £10,000 deposit. If you’re only able to get a 90% deposit, you would only be able to buy a house worth £100,000 with a £10,000 deposit.

Is there a minimum salary for a mortgage?

There isn’t a set minimum salary for a mortgage. If you’re on a low income, you may still be able to get a mortgage if the lender is satisfied you can afford the repayments.

Is 40% a good house deposit?

With a 40% deposit or more, lenders will see you as low risk. So, you’re likely to have a much wider choice of mortgages and more chance of getting the best mortgage deals.

How to find the best mortgage deal for your house

You can compare mortgage deals with Experian. It’s free and won’t affect your credit score.