How Much Deposit Do I Need?
It's the first big question on every first-time buyer's mind. Let's break it down into simple, manageable steps.
Hi, I'm Rob. As a mortgage broker based in Alsager, this is the question I hear more than any other. And for good reason! The deposit is the biggest financial hurdle to getting on the property ladder. You see headlines about huge deposits and it can feel impossible.
But I'm here to tell you it's not. Forget the scary numbers for a moment. The truth is, thousands of people in your exact position buy their first home every year. The key is understanding the system, knowing your options, and making a plan.
In this guide, I'll walk you through everything you need to know about your deposit, from the bare minimum to the 'gold standard'. We'll cover how it affects your mortgage, clever ways to save, and how family can help. Let's get you one step closer to holding the keys to your own front door.
The Deposit Tiers: What Each Level Unlocks
Think of your deposit as a percentage of the property price. The more you have, the better the deals you can typically access.
5% Deposit
The Starting Line
This is the minimum most lenders require. It gets you on the ladder, but it means borrowing 95% of the property's value (a 95% LTV mortgage). Because this is higher risk for the lender, interest rates are usually higher.
10% Deposit
A Big Step Up
Saving this extra 5% can make a real difference. A 10% deposit (90% LTV) often unlocks significantly better interest rates than a 5% deposit. You'll find more lenders and products available to you at this level.
15% Deposit
The Sweet Spot
This is a fantastic target. With a 15% deposit (85% LTV), you're seen as a much safer bet by lenders. This is where the most competitive interest rates often start to appear, potentially saving you a lot of money over the mortgage term.
20%+ Deposit
The Gold Standard
Anything from 20% upwards puts you in a very strong position. You'll have access to a wide range of lenders and some of the very best rates on the market. This is what many people aim for, but it's certainly not essential for first-time buyers.
Deposit vs. Interest Rate: The LTV Effect
LTV, or 'Loan-to-Value', is a simple but powerful concept. It's the percentage of the property price you're borrowing.
Property Price: £200,000
Your Deposit: £20,000 (10%)
Mortgage Needed: £180,000
Your LTV is 90%
Lenders use LTV bands (like the 95%, 90%, 85% tiers we just saw) to set their interest rates. The lower your LTV, the lower the risk for them, and the better the rate they can offer you. Even a small drop to a lower LTV band can make a big difference to your monthly payments.
This is why saving a bit more for your deposit can be so powerful. It's a trade-off: more saving now can mean lower payments for years to come.
Example: A £200,000 Property
Let's see how the deposit size impacts your mortgage on a typical first-time buyer home in Cheshire.
5%
£10,000 Deposit
£190,000 Mortgage (95% LTV)
Higher interest rate, higher monthly payments.
10%
£20,000 Deposit
£180,000 Mortgage (90% LTV)
Better rate, lower monthly payments.
15%
£30,000 Deposit
£170,000 Mortgage (85% LTV)
Even better rate, much lower payments.
Supercharging Your Savings: Two Key Tools
Saving a deposit is hard work. Luckily, there are some fantastic ways to get a helping hand.
The Lifetime ISA (LISA)
This is a must-have for any first-time buyer. It's a government scheme designed to help you save for your first home.
- Save up to £4,000 per year.
- The government adds a 25% bonus on top.
- That's a free £1,000 every year!
- You must be aged 18-39 to open one.
Important: Your LISA must be open for at least 12 months before you can use it to buy a home. So, even if you only open one with £1, the clock starts ticking. It's a no-brainer to open one as soon as you start thinking about buying.
Gifted Deposits
It's very common for parents or other close family members to help out with the deposit. Lenders are perfectly happy with this, but they need to follow a process.
- The gift must be from a close relative (usually parents/grandparents).
- You'll need a signed letter from them confirming it's a true gift, not a loan, and they have no stake in the property.
- They will also need to provide ID and proof of funds (e.g., a bank statement).
As your broker, I can provide you with the exact template letter lenders want to see, making the process smooth and simple.
Other Things to Consider
Your deposit is the main event, but there are a few other things to keep on your radar.
Stamp Duty
As a first-time buyer, you get a great deal. You pay 0% on the first £300,000. This can save you thousands, but you still need to factor it into your budget if your dream home is over that price. Our Stamp Duty Calculator can help.
Government Schemes
While Help to Buy has ended, schemes like Shared Ownership (where you buy a share of a property) and the First Homes Scheme (offering homes to local FTBs at a discount) are still available and can reduce the deposit you need.
100% Mortgages
These are sometimes called 'zero deposit' mortgages. They are rare, but do pop up now and then, often with specific criteria (like a good rental history). They aren't a mainstream option, but you can read more about them on our 100% mortgage guide.
Frequently Asked Questions
Ready to Start Your Plan?
Feeling clearer? I hope so. The next step is to turn these numbers into a personal plan. A quick chat with me can help you understand exactly where you stand and what you can afford.
Your home may be repossessed if you do not keep up repayments on your mortgage. Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.
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