Key takeaways:
- Most buyers need at least a 5% deposit for a residential mortgage.
- Your deposit size affects your Loan to Value (LTV) and mortgage options.
- Mortgage rates typically improve at specific LTV bands, not with every extra 1% deposit.
- Some lenders now offer eligible first-time buyers’ mortgages with deposits below 5%.
- Saving a larger deposit is not always the most financially beneficial option.
- The right deposit depends on several factors, including lender criteria and your personal circumstances, not just the property’s value.
How much deposit do I need for a mortgage?
Most UK buyers will typically need at least a 5% deposit for a residential mortgage (5% of the property’s purchase price). However, the exact amount required will depend on:
- Your personal circumstances.
- The type of property you are buying
- The price of the property.
- The lender’s criteria.
This means the exact amount required for a deposit will vary from person to person.
Beth Martin, Mortgage and Protection Adviser, says:
“Many people think there’s one deposit figure that works for everyone, but that’s simply not the case. The right deposit depends on your credit profile, affordability, the property you’re buying and the lender’s criteria. Our role is to match your circumstances to the lender that’s most likely to accept your application.”
What affects the deposit I will need?
Your deposit is not always determined by the property’s value alone. Although the Loan-to-Value (LTV) ratio is typically the main factor, some lenders may also take your credit profile, affordability and the property itself into account when deciding how much deposit you will need.
For example:
| Factor | Why it matters |
| Credit profile | Buyers with stronger credit profiles may have access to lower-deposit mortgage products. |
| Affordability | Your income and existing financial commitments affect how much a lender is willing to lend, which may influence the mortgage products available to you. |
| Property type | Some properties, such as certain new-build flats or non-standard construction homes, may require a larger deposit with some lenders. |
| Lender criteria | Every lender has different lending policies, meaning one lender may accept an application that another declines. |
This is one of the reasons why comparing mortgages yourself can be challenging, as each lender assesses applications differently.
Beth explains:
“Every lender has its own criteria, and that’s why speaking with a whole-of-market mortgage adviser can make such a difference. Just because one lender won’t accept a particular deposit level or property type doesn’t automatically mean another lender won’t.”
Will my deposit impact the mortgage products I can get?
Potentially, yes. The larger the deposit, the lower your Loan to Value (LTV), which is an important consideration as a lower LTV (e.g. 85%) can improve the mortgage products and interest rates available to you.
However, mortgage pricing does not improve with every extra percentage you save. Instead, lenders typically price their mortgages within specific LTV bands, for example:
| Deposit | Loan to Value (LTV) band |
| 5% | 95% |
| 10% | 90% |
| 15% | 85% |
| 20% | 80% |
This means you will generally need to reach the next deposit threshold, such as moving from a 95% to a 90% LTV mortgage, before you may benefit from improved rates or a wider choice of products.
As Beth explains:
“One of the biggest misconceptions is that every extra pound you save towards your deposit will improve your mortgage options. In reality, lenders usually work within Loan to Value bands, such as 95%, 90%, 85% and 80%.
That means increasing your deposit from 5% to 9% may not change the products or rates available to you, whereas reaching a 10% deposit and moving into the 90% Loan to Value bracket could open up a wider range of mortgages and potentially better interest rates. Understanding where those thresholds sit can help you make more informed decisions about how much you really need to save.”
Is saving a larger deposit always the best option?
Not necessarily. While a larger deposit can improve your mortgage options by improving your LTV, paying the maximum amount you have saved is not always the most suitable financial decision.
Many first-time buyers assume they should put every penny they have saved towards their deposit. However, in some situations keeping money aside could be beneficial, whether that is for emergency savings, home improvements or other long-term financial goals.
As previously mentioned, mortgage interest rates often improve at specific LTV bands, such as moving from a 95% to a 90% mortgage. However, increasing your deposit from 5% to 9%, for example, may not improve the mortgage products available as you have not reached the next LTV band (e.g. 10% deposit with a 90% LTV).
Beth says:
“It’s easy to assume that putting down the biggest deposit possible is always the right decision, but that’s not necessarily true. Sometimes keeping some of those savings available can put you in a stronger financial position overall. It’s about finding the right balance for your circumstances, not simply using every pound you’ve saved.”
Can I get a mortgage with less than a 5% deposit?
Potentially, yes. Some lenders now offer low-deposit mortgage schemes for eligible first-time buyers, although these products usually come with stricter criteria.
In recent months, several major lenders have introduced new products that may allow eligible buyers to purchase a property with a deposit of around 1-2% or a minimum cash deposit of £5,000 (subject to eligibility and lender criteria).
There are also a small number of specialist products that may allow eligible buyers to purchase without a traditional deposit, although these are far less common and typically have stricter eligibility requirements and higher interest rates.
However, eligibility varies between lenders and will depend on factors such as:
- The property you are buying.
- Where your deposit is coming from.
Beth says:
“The mortgage market is constantly evolving. We have recently seen lenders introduce products designed to help first-time buyers purchase with much smaller deposits than many people expect. They won’t be suitable for everyone, but they show why it’s always worth exploring your options before assuming you need years more to save.”
Frequently asked questions
- Do all lenders require the same deposit?
No. Every lender has its own lending criteria, meaning deposit requirements can vary depending on your circumstances and the property you are looking to buy.
- Does this apply to buy-to-let mortgages?
No. Buy-to-let mortgages are assessed differently, and deposit requirements are typically higher than for residential mortgages.
- Can my mortgage deposit be a gift?
Yes, many lenders accept gifted deposits, provided they meet the lender’s criteria. A gifted deposit is usually money given by a family member, although some lenders may also accept gifts from other individuals. You will normally need to provide evidence of where the money has come from, and the person giving the gift may need to confirm that it does not need to be repaid.
- What costs should I budget for besides my deposit?
You may wish to budget for your first mortgage repayment, solicitor’s fees, mortgage valuation costs, survey fees, removal expenses and, where applicable, Stamp Duty Land Tax. Factoring these costs into your budget can help ensure you are financially prepared for your property purchase.
How can Cooper Associates Mortgages help?
Whether you have saved 5%, 10% or more, or you are exploring one of the latest low-deposit mortgage schemes, our whole-of-market mortgage advisers can help. Because we are not tied to any specific lender, we can compare mortgage products from across the market and help you identify the most appropriate route to homeownership.
We will take the time to understand your circumstances, explain your options clearly and recommend a suitable solution based on your individual needs, helping you move forward with confidence and clarity.
To speak with one of our award-winning advisers, get in touch to arrange a fee-free, no-obligation meeting and take your first step towards homeownership today.
