Mortgage deposit explained How much deposit do I need for a mortgage?
The rate of interest you pay on the amount of money you borrow and the size of your deposit are key to the mortgage deal you'll be able to get. Put simply, the bigger your deposit, the better and cheaper the deal you’ll receive.
If you put down a large deposit, you'll own more of your property outright at the outset.
Because of this, lenders will view you as a lower-risk customer, as it's less likely that if house prices fall you will fall into negative equity - this is where the amount you owe is more than the value of your home.
Go further: How to get the best mortgage deal - our six-page guide explains it all
Getting the best mortgage deal
To get the best mortgage deals on the market you will typically need a 30% or even 40% deposit. Any more than 15% and you will start to qualify for some of the cheaper deals on the market. However, for most people looking to get onto the property ladder, a saving of 15% or more can be difficult.The Which? mortgage comparison tables let you search all available deals from all available lenders to choose the best deals based on quality of service as well as cost and benefits.
Many first time buyers will look to get a 90% 'loan to value' mortgage. This means that you are borrowing 90% of the value of the property you want to buy, and will need a deposit equivalent to 10% of the property's value. On a property valued at £200,000, this means you'll need a deposit of £20,000.
Be aware, though, that 90% mortgages will have higher interest rates than those with a lower loan to value.
Higher lending charges
If you're looking to borrow more than 75% of the value of a property, some lenders might charge a higher lending charge, which is an insurance against you defaulting on any payments. This is also known as a mortgage indemnity guarantee.
Typical costs are between 4% and 6% of the amount you have borrowed above 75% of the value of the property.
How much will I need to save for a mortgage deposit?
The mortgage deposit is a significant part of the overall costs that you’ll need to pay to buy a home. But there are other considerations to factor in before you have enough to go ahead and purchase a property, including:
- Stamp duty – this can range between 1% and 15% depending on the value of the property
- Mortgage arrangement fees – charged by lenders to arrange your mortgage and typically ranging between £0 and £2,000
- Legal fees - you'll need to appoint a solicitor to arrange the purchase of your property
- A building survey, homebuyers survey or condition report - these can range between £100 and over £1,000
- Land Registry fees - these can range between £50 and £920 depending on the value of the property