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How big a deposit do I need?


How big a deposit do I need for a mortgage?

There is no standard amount that people need to have saved up before they can get a mortgage. But a basic principle to keep in mind is that the bigger the deposit you have, the cheaper the mortgage deals you will be able to get.

This is because the more money you have to put towards a house, the less of a risk you pose to a lender. If you own more of the property, you’ll need a smaller loan and therefore have lower monthly repayments, making you less likely to fail to meet them.

And if your property were to fall in value, a higher deposit puts you at a far lower risk of negative equity, meaning your loan is bigger than the value of your property.

But don’t despair if you’re struggling to save a large deposit – there are still many mortgages out there for first-time buyers. You can find typical first-time buyer mortgage rates in our rates tables.


What is loan-to-value and why does it matter?

The loan-to-value is the proportion of the property’s value that you are borrowing. Mortgages are priced by the loan-to-value – the higher this figure is, the more expensive the mortgage will be.

If you can put down a 15% deposit, instead of a 10% deposit, for example, you will be rewarded with a lower mortgage interest rate.

To get the most competitive mortgage deals on the market, you will usually need a deposit of 25% upwards and some of the best deals require 30% or even 40% deposits.

For most first time buyers, getting a deposit together this big may be unrealistic so you may want to look into alternative ways of funding your home purchase.

Can I get a mortgage with a small deposit?

The number of 90% and 95% mortgages on the market is on the increase so, provided you meet lenders’ affordability criteria, it’s entirely possible to get a mortgage if you have a 5% or 10% deposit.

Say you wanted to buy a £200,000 house. You’d need to have £20,000 in savings for a 90% mortgage or £10,000 in savings for a 95% mortgage.

You can find out more in our guide to 95% mortgages.

There are also two government schemes aimed at helping people with small deposits to buy a house.

Help to Buy helps you purchase a new-build property using an interest-free loan from the government.

Shared equity and share ownership allow you to buy a share in a property using a small deposit and a mortgage while paying rent to a housing association for the remaining share.

Both of these schemes are designed for people with deposits of between 5% and 20%.

Whether you will be better off with an ordinary mortgage or using one of the government schemes will depend on your individual circumstances. An adviser will be able to talk you through your options and help you find the best deal.

Is it possible to get a mortgage without a deposit?

100% mortgages, where you don’t need any deposit, are virtually non-existent unless you have additional financial help from your family.

You can find out more about your options in our guide to how parents can help first-time buyers and our guide to 100% mortgages.

What are the ways to save for a mortgage deposit?

There are two government savings schemes that offer support in building up a mortgage deposit.

Help to Buy Isa

This allows you to save £200 a month (and £1,000 in your first year) and the government adds a 25% bonus. You can save a maximum of £12,000 into a Help to Buy Isa, which would be topped up to £15,000 with the government bonus.

The bonus is paid when you complete on your house purchase. Find out more in Which?’s guide to the Help to Buy Isa.

Lifetime Isa

This is available to people aged between 18 and 40. The concept is similar to a Help to Buy Isa, but the money in a lifetime Isa can either be used to buy a property or to fund your retirement.

You can save in £4,000 a year, and the government will add a 25% bonus to a maximum of £1,000. But if you withdraw your money for any other reason than to buy a home (or at age 60 for retirement), you’ll face a 25% penalty.

Find out more in Which?’s guide to lifetime Isas.

Do I need to save more than just the mortgage deposit?

When you buy a property, it’s not just your deposit you’ll need to find. You’ll have to pay solicitor’s fees, as well as spend money on a survey.

Perhaps the biggest cost, however, will be stamp duty. This varies depending on the value of your property, but there is good news for first-time buyers.

If you’re buying a property worth £300,000 or less, you’ll have no stamp duty to pay. And if you’re buying a property worth up to £500,000, you’ll pay 5% on the difference between £300,000 and the property price.

Use our stamp duty calculator to work out how much you’ll pay.

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