You don't always need a large deposit to buy a home.
Some mortgages are available with a deposit of 5%, and 100% mortgages are also available in certain circumstances.
However, having a larger deposit can give you access to a wider choice of mortgage deals and may help you secure a lower mortgage rate.
So, how much deposit do you actually need, and are there ways to buy a home with a smaller deposit?
What is a mortgage deposit?
A mortgage deposit is the amount of money you contribute towards the purchase price of a property yourself.
For example, if you wanted to buy a £250,000 property with a 10% deposit:
- Property price: £250,000
- Deposit: £25,000
- Mortgage: £225,000
- Loan to value (LTV): 90%
The deposit is not the only money you may need when buying a home. You should also budget for costs such as legal fees, surveys, mortgage fees, moving costs and, where applicable, Stamp Duty Land Tax or other property taxes.
How much deposit do I need for a mortgage?
There isn't one deposit requirement that applies to every mortgage.
Many mortgages are available with a deposit of around 5% to 10% of the property's purchase price. The exact amount you need depends on the lender, mortgage product, property and your circumstances.
For example, a 5% deposit on a £250,000 property would be £12,500.
The mortgage you need would then make up the remaining amount.
A larger deposit isn't necessarily required, but it can increase the range of mortgages available to you.
Can I get a mortgage with a 5% deposit?
Yes. 95% loan-to-value mortgages are available, meaning you contribute a 5% deposit and borrow the remaining 95% of the property's value.
The government also has a permanent Mortgage Guarantee Scheme designed to support the availability of 91% to 95% LTV mortgages with participating lenders. Eligibility and lender criteria apply, so you shouldn't assume that every applicant or property will qualify.
The availability of 5% deposit mortgages can also change between lenders and mortgage products.
Can I get a mortgage with no deposit?
Possibly.
Some 100% LTV mortgages allow eligible borrowers to purchase a property without providing a conventional cash deposit.
However, 100% mortgages are not available to everyone and can have specific eligibility requirements. Lenders may consider factors such as your income, credit history, affordability, employment circumstances and the property you want to buy.
A mortgage with no deposit can also carry greater risks.
If property prices fall, you could find that your mortgage is larger than the value of your property. This is known as negative equity.
You should therefore consider the overall cost and risks of a mortgage rather than choosing a product simply because it requires a smaller deposit.
Is a bigger mortgage deposit better?
Not necessarily, but a larger deposit can have advantages.
The bigger your deposit, the smaller your mortgage will normally be in relation to the property's value. This is reflected in your loan-to-value ratio, or LTV.
What is loan to value (LTV)?
Loan to value is the percentage of the property's value that you're borrowing through your mortgage.
For example, if you buy a £300,000 property with a £30,000 deposit, you would borrow £270,000.
Your LTV would be 90%.
£270,000 mortgage ÷ £300,000 property value = 90% LTV
LTV is important because mortgage lenders use it when assessing mortgage applications and pricing products.
Generally, a lower LTV means you have more equity in the property and are borrowing a smaller proportion of its value.
What if I can't afford a 10% deposit?
You don't necessarily have to wait until you have saved 10%.
Some mortgages are available with deposits of 5%, and there may be other ways of helping you fund your purchase.
Depending on your circumstances, you could consider:
A Lifetime ISA
If you're eligible for a Lifetime ISA, you can save up to £4,000 each tax year and receive a 25% government bonus on your contributions, up to £1,000 per year.
There are rules around who can open a Lifetime ISA and how the money can be used. For example, when buying a first home, the property must cost £450,000 or less and your first payment into the Lifetime ISA must generally have been made at least 12 months before the purchase.
Make sure you understand the withdrawal rules before using a Lifetime ISA for a house deposit.
A gifted deposit
Some lenders will accept a deposit gifted by a family member or another person, subject to their lending criteria.
The lender will normally require evidence about where the money has come from and may require a declaration confirming that the money is a genuine gift rather than a loan.
The rules vary between lenders, so don't assume a gifted deposit will automatically be accepted.
Government-backed or supported schemes
There are various schemes that may help some buyers purchase a property with a smaller deposit or at a reduced purchase price.
For example, the permanent Mortgage Guarantee Scheme supports participating lenders in offering eligible borrowers mortgages at up to 95% LTV.
The First Homes scheme can also allow eligible first-time buyers and other qualifying buyers in England to purchase certain properties at a discount of at least 30% from market value, subject to the scheme's eligibility and property requirements.
Schemes can change, and eligibility criteria apply.
Do first-time buyers need a deposit?
Not necessarily.
First-time buyers can potentially use a mortgage with a 5% deposit, and some 100% mortgage products may also be available to eligible applicants.
There are also schemes designed to help some first-time buyers.
However, being a first-time buyer does not automatically mean you qualify for a particular mortgage or government scheme. Lenders will still assess affordability, credit history and other eligibility criteria.
How much deposit do I need for a £200,000 house?
The amount depends on the mortgage's LTV.
For a £200,000 property:
- 5% deposit = £10,000
- 10% deposit = £20,000
- 15% deposit = £30,000
- 20% deposit = £40,000
- 25% deposit = £50,000
These figures are examples only. The mortgage products available to you will depend on your circumstances and the lender's criteria.
How much deposit do I need for a £300,000 house?
For a £300,000 property:
- 5% deposit = £15,000
- 10% deposit = £30,000
- 15% deposit = £45,000
- 20% deposit = £60,000
- 25% deposit = £75,000
Remember that you may also need money for other costs associated with buying a property.
Do I need money on top of my mortgage deposit?
Yes, you should normally budget for costs beyond the deposit.
Depending on the property and your circumstances, these could include:
- Mortgage fees
- Valuation or survey costs
- Solicitor or conveyancing fees
- Searches
- Moving costs
- Buildings insurance
- Stamp Duty Land Tax, where applicable
- Other property or transaction costs
If you're a first-time buyer in England, Stamp Duty Land Tax relief may be available. Current rules provide relief on purchases up to £500,000, with no SDLT on the first £300,000 and 5% on the portion between £300,001 and £500,000, provided the relevant conditions are met.
Stamp Duty rules are different in Scotland and Wales.
Always check the current rules for the part of the UK where you're buying.
Does a larger deposit mean a cheaper mortgage?
It can, but there is no guarantee.
Mortgage pricing is influenced by your LTV as well as other factors.
A lower LTV can give you access to mortgage products with lower interest rates. It can also mean you borrow less money.
However, the cheapest-looking interest rate isn't necessarily the best mortgage for your circumstances. You should consider the overall cost of the mortgage, including fees and any other applicable charges.
Should I wait until I have a bigger deposit?
Not necessarily.
There are potential advantages to saving a larger deposit, but waiting also has a financial cost.
For example, while you're saving you may continue paying rent, property prices may change and mortgage rates may change.
On the other hand, buying with a smaller deposit means borrowing more and may mean paying a higher mortgage rate.
There isn't a universal answer. The right approach depends on your finances, affordability, the property you're considering and the mortgage options available when you're ready to buy.
Can I use my savings for both my deposit and buying costs?
You can use your savings to cover different costs associated with buying a home, but you should make sure you understand how much cash you'll need before committing to a purchase.
Using all your savings for a deposit could leave you with little or no emergency fund.
It's worth budgeting for both the purchase and the ongoing costs of owning a property.
What deposit do I need if I'm self-employed or have bad credit?
There isn't a single deposit requirement for self-employed applicants or people with a less-than-perfect credit history.
Some lenders may accept applications with smaller deposits, while others may have stricter lending criteria.
Your deposit is only one part of a mortgage application. Lenders may also consider your income, credit history, existing commitments, affordability and the type of property you're buying.
If your circumstances are more complicated, getting mortgage advice before making an offer on a property can help you understand what may be available.
Is it worth speaking to a mortgage broker about a small deposit?
It can be useful to understand your options before you start looking for a property.
A mortgage adviser can assess your circumstances and explain the mortgage options that may be available, including products with higher LTVs where appropriate.
A mortgage broker does not guarantee that you'll be accepted for a mortgage, and you should not assume that a particular lender or product will be available until your circumstances and application have been assessed.
Do I really need a deposit?
No, not necessarily.
A deposit of 5% is enough for some mortgages, and some 100% mortgages are available to eligible borrowers.
However, a larger deposit can provide access to a wider range of mortgage products, may help you secure a lower interest rate and means you need to borrow less.
The important thing is to look at the whole picture: your deposit, affordability, mortgage costs, savings, financial commitments and the risks of taking on a larger mortgage.
Important information
The information on this page is for general information only and does not constitute a personal recommendation or financial advice.
Mortgage availability, interest rates, lending criteria and government schemes can change. Eligibility varies between lenders and individual circumstances.
If you are considering a mortgage, you should obtain personalised advice based on your circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.