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 the amount of money you borrow will outweigh the value of your home. If you get into difficulty repaying your mortgage and your home is repossessed, you'll be able to pay off the amount borrowed in full.
Getting the best mortgage deal
To get a good mortgage deal, a deposit of up to 25% of the home's value is needed. Any more than that and you’ll usually qualify for the cheapest deals in the market – some of the best deals require 30% or even 40% deposits. However, for most people looking to get onto the property ladder, a saving of 25% or more can be difficult.
You can use the mortgage calculators and first time buyer rates tables on the Which? Mortgage Advisers website to figure out how much you may be able to borrow and the kind of mortgage deals you are likely to to get.
Few manage to achieve this alone, and often require help from parents or grandparents to put down a bigger deposit. First time buyer help from parents - read our in-depth guide.
Most 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.
There are other types of mortgages available that require smaller deposits, but come with significantly higher rates and greater risks. You can learn more in our guides to 95% mortgages and 100% mortgages.
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
Need mortgage advice?
We believe you should seek independent mortgage advice before taking out a mortgage. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased.co.uk website.