If you are planning to buy a home, one of the first questions on your mind is likely how much deposit you need for a mortgage. The short answer is that most lenders expect a minimum of 5% to 10% of the property price, but the deposit you choose to put down can have a significant effect on the deal you are offered. This guide explains how deposits work, why size matters, and how to build yours.
What is a mortgage deposit?
A deposit is the portion of the purchase price you pay yourself, upfront. The rest is covered by your mortgage. Deposits are expressed as a percentage of the property value, and that percentage determines your loan-to-value ratio (LTV) — the proportion of the property you are borrowing against.
For example, on a £250,000 home:
- A 10% deposit is £25,000, giving you a 90% LTV mortgage
- A 20% deposit is £50,000, giving you an 80% LTV mortgage
The lower your LTV, the less risk the lender takes on, which is why bigger deposits typically open the door to better rates.
How much deposit do you need as a minimum?
Most UK lenders require a minimum deposit of 5% of the property price. So on a £200,000 home, that is £10,000. Some lenders offer higher-LTV products, and a small number of specialist or guarantor arrangements may require less, but 5% is the usual entry point for first-time buyers.
A 10% deposit is often a more comfortable target. It gives you access to a wider range of products and can meaningfully reduce your monthly repayments.
How deposit size affects your mortgage rate
Lenders price their mortgages in LTV bands, and the difference between bands can be substantial. As a rule of thumb, rates tend to improve at each of these thresholds:
- 95% LTV (5% deposit) — the highest rates, fewest products
- 90% LTV (10% deposit)
- 85% LTV (15% deposit)
- 80% LTV (20% deposit)
- 75% LTV (25% deposit) — typically among the most competitive rates
Crossing a threshold — say, saving an extra 1% or 2% to move from a 90% to an 85% LTV — could reduce your interest rate and your monthly payment. It is worth doing the sums before you buy, and an adviser can model this for you.
Gifted deposits
Many first-time buyers receive help from family, often called a gifted deposit. This is money given, not lent, usually by parents or grandparents. Lenders generally accept gifted deposits but will ask for:
- A letter from the person gifting the money confirming it is a genuine gift with no expectation of repayment
- Confirmation that they have no stake in the property
- Proof of the source of the funds, as part of anti-money-laundering checks
If money is being lent rather than gifted, that changes things, because the repayments count as a financial commitment. Being upfront with your adviser about where your deposit comes from helps avoid delays later.
Saving for a deposit
Building a deposit takes discipline, but a few strategies can accelerate it:
- Lifetime ISA (LISA): If you are aged 18 to 39, you can save up to £4,000 a year and the government adds a 25% bonus, up to £1,000 annually. The funds must go toward a first home up to a set value or be kept until age 60, and rules apply, so check the current terms before opening one.
- Set up a dedicated savings account and automate a monthly transfer so saving happens before you can spend.
- Review your outgoings and redirect subscriptions or non-essentials into your deposit fund.
- Consider your timescale. A slightly longer wait to reach the next LTV band may pay off in lower rates.
Tax rules and savings-scheme thresholds change over time, so treat any figures here as correct at the time of writing and confirm the current limits before you rely on them.
Do you need a bigger deposit if you are self-employed?
Not necessarily. Self-employed applicants are assessed on the same LTV bands as everyone else, but lenders may look for a track record of income, usually one to three years of accounts or tax calculations. A larger deposit can sometimes broaden your options if your income is more variable, but it is not a formal requirement.
How Wisely can help
The right deposit strategy depends on your goals, your timescale and the rates available across the market. As an independent, whole-of-market adviser with access to 120+ lenders, Wisely can show you how different deposit levels affect the deals you could access, and help you decide whether to buy now or save a little longer.
For your mortgage, we are not a fee-free broker — you pay a clear, capped fee for genuine advice, and our protection advice is free — and our clients tell us that clarity is worth it. Big decisions, made wisely. To talk it through with no obligation, book a free call on 023 8268 1111.
This guide is general information, not personal financial advice. Your home may be repossessed if you do not keep up repayments on your mortgage.
Frequently asked questions
Can I get a mortgage with a 5% deposit?
Yes, many lenders offer 95% LTV mortgages, meaning you need a 5% deposit. The rates are typically higher than lower-LTV products, so if you can stretch to 10% you may access better deals.
Is a bigger deposit always better?
A larger deposit usually means lower rates and smaller monthly payments, so it often makes financial sense. That said, it is worth balancing this against keeping some savings back for moving costs and emergencies rather than putting every penny into the deposit.
Can my parents give me the deposit?
Yes, gifted deposits from close family are widely accepted by lenders. You will need a letter confirming it is a genuine gift with no repayment expected and no stake in the property, plus proof of where the funds came from.
Does a deposit include stamp duty and fees?
No, your deposit is separate from the other costs of buying. You will also need to budget for legal fees, surveys, and any stamp duty due, so factor those in alongside your deposit.