How much deposit do you need for a mortgage?
It's technically possible to get a mortgage with a deposit of 5% of a property's value. In the current market, however, you might find you need as much as 10%, as many lenders have withdrawn their low-deposit deals due to economic issues caused by COVID-19.
This might be set to change soon, with several major banks having signed up to offer new 95% deals under the government's 95% mortgage guarantee scheme, which will launch in April 2021.
Here's how much cash you'd need to put down on a £200,000 property, based on different deposit sizes:
- 5% deposit: £10,000
- 10% deposit: £20,000
- 15% deposit: £30,000
How to improve your mortgage chances
In the video below, property expert and TV presenter Jonnie Irwin explains why it's sometimes worth saving more than the minimum deposit.
- Find out more: what is a mortgage?
How much deposit will you need in cash terms?
To calculate how much you’ll need to save for your mortgage deposit in cash terms, there are two things you should consider:
Typical property prices in your area
You can get a rough idea of local house prices from property portals such as Rightmove or Zoopla, and by speaking to local estate agents.
Bear in mind that the figures you'll see on portals and agent websites are asking prices, so they may be a little higher than what the properties are really worth.
For more concrete information, you can check how much homes in the area have sold for using the Land Registry's price paid tool.
How much can you afford in repayments each month?
Mortgage rates are changing all the time, and the right deal for you might not be the one with the cheapest rate.
Instead, you'll need to factor in things such as upfront fees, early repayment charges, and minimum and maximum terms.
You can find typical mortgage rates using the Which? Money Compare mortgage tables, then understand how much your monthly payments would be based on different interest rates using our mortgage repayment calculator.
If you can't afford the repayments for a low-deposit mortgage, you will either need to save a bigger deposit (see below) or investigate schemes such as Help to Buy.
- Find out more: the costs of buying a house.
Reasons to save a bigger mortgage deposit
While 5% is the minimum you'll need, there are plenty of reasons to save more if you can.
- Cheaper monthly repayments: it might sound obvious, but the bigger your mortgage deposit, the smaller your loan will be. The smaller your loan is, the cheaper your monthly repayments will be.
- Better mortgage deals: a larger deposit will also make you less risky for mortgage lenders and, as a result, they'll generally offer you lower interest rates. For example, 90% mortgages are generally priced around 0.7%-1% cheaper than 95% deals.
- Improved chance of being accepted: all lenders conduct affordability checks to work out whether you can afford the mortgage repayments, based on your income and outgoings. If you only put down a small deposit it’s more likely you will fail these checks because you'll need to spend more on your mortgage each month.
- Bigger buying budget: lenders typically offer a loan of up to four-and-a-half times your annual salary, so if your salary is relatively low and you can't borrow enough, you may need a larger deposit just to make up the value of the property.
- Less risky: if you own more of your home outright you are less likely to fall into ‘negative equity’, where you owe more on your mortgage than your property is worth. Being in negative equity can make moving house or switching mortgage very difficult.
Find out more: how to save for a mortgage deposit
Mortgage deposit calculator
Saving for a deposit can seem like a never-ending journey. We've created a deposit calculator to give you an idea of when you'll have saved enough deposit to buy a home in your area.
Simply answer the questions below to see how long it might take you to get on to the property ladder.
Map: average first-time buyer deposits in your area
You can use the interactive map below to find out how much deposit first-time buyers typically put down in your area. Simply hover your cursor over a local authority (or touch your screen) to see the average deposit paid and what percentage of the property price it covers.
The map shows that people buying properties in London and the south-east of England pay significantly higher deposits than most other areas of the UK.
This is partly because house prices are generally much higher in these areas, and therefore even a 5% deposit can require a savings pot of around £20,000.
- Find out more: how to buy a house
When you come to the point of exchanging contracts on a property, you'll usually pay a deposit as part of legally committing to the purchase.
The standard amount for an exchange deposit is 10% of the property price – but if you're planning on buying with a 5% deposit, that can usually be negotiated by your solicitor or conveyancer. Let them know as early in the buying process as possible so they can warn the seller's conveyancer about it.
The exchange deposit has been a sticking point with some people who've wanted to use the bonus earned on their Help to Buy Isa at this stage of buying their first home. As the bonus is only paid on completion, you can't use it as an exchange deposit, and will therefore need to have money from an alternative source.
If this is going to be difficult for you, your conveyancer may be able to negotiate a further reduction to the exchange deposit.
- Find out more: exchange and completion
You'll often see mortgages described as being a certain 'LTV'. This stands for 'loan to value', and basically means the percentage of the property price that will be covered by the mortgage.
For example, if you provided a 5% deposit, you'd need a mortgage with a 95% LTV.
To find out your LTV, simply enter your deposit amount and the property price below.
Your options if you're struggling to save
Help is at hand if you're struggling to save up a big enough deposit for your first home.
Here are some options to consider:
- Help to Buy equity loan: you put in a deposit of 5%, the government lends you up to 20% in England and Wales or 40% in London, and you get a mortgage to cover the rest. (Scotland's scheme has now closed.)
- Shared ownership: you buy a share of the property and pay rent on the rest.
- Buy a house with your friends: it's not without its risks, but works well for some.
- Get help from your parents or family members: they don't necessarily need to gift you cash towards your deposit. Instead, they can use their savings or property as collateral against your mortgage.
- Lifetime Isa: a savings account account offering a 25% bonus from the government. You need to be aged under 40 when you open it, and can't access your savings or the bonus until you've had the account for at least a year.
A 100% mortgage is a mortgage for the full cost of the house, meaning you don't need to put in any deposit at all.
Currently, the only kind of 100% mortgage you can get is a guarantor mortgage, where a family member takes on some of the risk of your loan by offering up their home or savings as security in the event that you don't make your mortgage repayments.
There are very few of these deals on the market, and they carry a significant risk of negative equity – when you owe more on your mortgage than your property is worth – so you and your family should take professional advice before applying.
- Find out more: 100% mortgages advice guide
To get a buy-to-let mortgage you'll usually need a deposit of at least 20-25% of the property's value. But as with residential mortgages, the higher the deposit, the better the deal you're likely to get.
Lenders ask for a higher deposit because buy-to-let properties are deemed a riskier investment: as you won't be living there yourself and will likely need rent from tenants in order to keep up with your own repayments, there are more things that could go wrong.
- Find out more: buy-to-let mortgages explained
Mortgage deposit FAQs
Click below for answers to some of the most frequently asked questions when it comes to property deposits.
Will I get my mortgage deposit back?
While other kinds of deposits – such as a damage deposit for a holiday home – may be returned back to you, this is not how property deposits work. With a deposit on a property you're paying a small portion of the overall price, and the mortgage lender is loaning you the rest. Then, over time, you gradually pay the mortgage lender its money back.
You won't be refunded the deposit back once you've bought the house, or if you move, but as you've used it to buy a percentage of the house you essentially keep it as equity.
Who do I pay a mortgage deposit to?
While you do need to prove to your mortgage lender that you have the funds saved, you actually pay the deposit to your conveyancer at the point of exchanging contracts.
Once the contracts have been signed and the mortgage has completed, your deposit will go to the seller, along with the money from your lender covering the rest of the property value.
Can I pay for my mortgage deposit with a loan?
This often depends on the type of loan, your lender, and how much you want to borrow.
Lenders will ask how you've come up with the money for your deposit, and will usually state that it needs to be from a 'non-refundable' source – ie your own savings or a gift from a family member – rather than a loan or anything you'll have to pay back.
However, loans repayable upon the sale of the property are OK with some lenders. This might be the case if your parents or a friend has loaned you some money for your deposit.
Even if you're taking out a loan that's repayable on a monthly basis, some lenders may accept it, but they'll factor it in to how much they will lend. So, if you've taken out a loan for your deposit, it's likely you'll be able to borrow less than if you paid from your own savings.
Can parents contribute towards my mortgage deposit?
Yes, but there are certain procedures that need to be followed, such as providing a letter that the money won't need to be repaid.
Some lenders may also limit the percentage of your deposit that can come from a family member.
Find out more: how parents can help first-time buyers
Will I need a bigger deposit if I have bad credit?
Quite possibly. When you're applying for a mortgage, lenders will take your deposit and salary into account, but they'll also use your credit history as part of their assessment of whether you are likely to be able to pay back a large loan. If your credit history shows that you've failed to keep up with other loan repayments, defaulted on bills or faced County Court Judgements (CCJs), some lenders won't lend to you.
Other lenders will still consider you for a mortgage, but it's likely that you'll have to prove that you've kept up with repayments for a certain amount of time, and the most competitive rates and higher LTVs may not be an option.
Find out more: bad credit mortgages