Saving for a deposit is often the biggest hurdle for people looking to get into the property ladder for the first time. When you start out saving, it can feel like a huge mountain to climb. One of the main reasons people get disheartened and feel like they’ll never be able to buy a house is because it can be hard to answer that critical question: how much deposit do I need for a house?

And while you might hear about different percentages or calculations, the TLDR answer is this isn’t just about meeting a minimum requirement. Instead working out how much deposit do I need for a house can be vital to access better mortgage deals and make your home purchase more affordable in the long run.

 

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The Minimum Deposit vs The “Good” Deposit

It’s important to distinguish between the absolute minimum deposit you might need to get on the property ladder and a “good” deposit that gives you more choice and better rates. The minimum gets your foot in the door but a larger deposit gives you more power as a borrower

So what’s the minimum deposit?

In the UK the typical minimum deposit required for a mortgage is usually 5% of the property’s purchase price. This means you would need a 95% Loan-to-Value (LTV) mortgage where you borrow 95% of the property’s worth.

While 95% LTV mortgages are available, often supported by government-backed schemes, they can be more difficult to secure. Lenders may have stricter affordability and credit scoring criteria for these products as they represent a higher risk. You’ll also find that the interest rates are higher compared to mortgages with a lower LTV.

Not sure about loan-to-value or your credit score?

Read more in our guide – what is loan to value?
What credit score do you need to buy a house?

Why Aim for More Than the Minimum?

Saving more than the 5% minimum can have a huge positive impact on your mortgage options. The key reason for this comes down to Loan to Value (LTV). LTV is the ratio of how much you’re borrowing compared to the value of the property. When trying to work out how much deposit do I need for a house, thinking about how you can lower your LTV is probably the most important thing you need to do.

REMEMBER: A bigger deposit means a lower LTV which lenders love because it reduces their risk. They reward borrowers for this with significant benefits:

  • Better Interest Rates: Lenders reserve their most competitive rates for borrowers with lower LTVs.
  • More Choice: A larger deposit unlocks a wider range of mortgage products from more lenders.
  • Lower Monthly Payments: Simply put, borrowing less money means your monthly repayments will be lower.
  • Increased Chance of Approval: A substantial deposit strengthens your application and shows lenders you are financially disciplined.

How Your Deposit Affects Your Mortgage (LTV Bands)

Lenders tier their mortgage products into LTV bands. Even a small jump in your deposit can push you into a lower LTV band, unlocking better interest rates. Common bands include:

  • 95% LTV (5% deposit)
  • 90% LTV (10% deposit)
  • 85% LTV (15% deposit)
  • 75% LTV (25% deposit)
  • 60% LTV (40% deposit) – often where the very best rates are found.

Moving from a 10% deposit to a 15% deposit can make a real difference to the interest rate you’re offered and the amount you pay over the mortgage term.

An Example for “How much deposit do I need to buy a house?”

Let’s look at a property valued at £250,000 to see how the deposit amount changes:

  • 5% deposit: £12,500 (95% LTV)
  • 10% deposit: £25,000 (90% LTV)
  • 15% deposit: £37,500 (85% LTV)
  • 20% deposit: £50,000 (80% LTV)

In this example, while being able to answer the question how much deposit do I need for a house with £12,500 might technically be correct, being able to say £37,500 might mean you get a considerably better interest rate on your mortgage and pay less over the total period of the loan. Saving an additional £25,000 before you start might save you in excess of £100,000 over the whole 25 or 30 year term of the mortgage.

Tips for Saving for a House Deposit

Knowing how much deposit do I need for a house is one thing; saving it is another. We know saving is hard, but there are some things you can do to make it easier:

    1. Create a Strict Budget: Use a spreadsheet or app to track all your income and outgoings. Identify non-essential spending you can cut back on.
    2. Set a Clear Savings Goal: Work out your target deposit amount and break it down into manageable monthly savings goals.
    3. Open a Dedicated Savings Account: Consider using a high-interest savings account or a Lifetime ISA (LISA) which gives you a 25% government bonus on your savings (up to £1,000 bonus per year) specifically for your first home. [External Link: MoneyHelper – Lifetime ISAs]
    4. Automate Your Savings: Set up a standing order to move a set amount into your savings account the day you get paid.
    5. Review Your Major Expenses: Could you reduce your rent by moving to a cheaper area temporarily? Can you switch utility or mobile providers to save money?
    6. Consider a “Side Hustle”: Look for ways to generate extra income dedicated solely to your deposit fund.

 

What About Gifted Deposits?

Many first-time buyers get help from their families. Most lenders are happy to accept a gifted deposit from a close relative (usually parents or grandparents). However they will require a signed letter from the person gifting the money confirming that it is a non-refundable gift and that they hold no legal stake in the property. If you are lucky enough to be in this position, this is an important option to be aware of when considering how much deposit do I need for a house.

OneDome is here to help

Choosing a mortgage is complex but OneDome is here to help. If you have any questions about the specifics of mortgages, the wider mortgage process or want tailored advice on the different types of mortgages that suit your situation you can:

Important: Your home may be repossessed if you do not keep up repayments on your mortgage.