How Much Deposit Do You Need To Buy a House? A Simple Guide for First Time Buyers

If you are thinking about buying your first home, one of the first questions you will probably ask is: how much deposit do you need to buy a house? The good news is that you often need far less than people expect. In fact, many first time buyers can get started with a 5 percent deposit, and in some cases even less.

This guide will walk you through the different deposit levels, how lenders see them and how each one affects your monthly mortgage payment.

The minimum deposit most buyers need is 5 percent

For the majority of first time buyers, the lowest standard deposit is 5 percent of the property price. This is known as a 95 percent mortgage.

For example:
If a property costs £250,000, a 5 percent deposit would be £12,500.

Many high street lenders offer 95 percent mortgages, and they are very popular with first time buyers who want to get onto the property ladder sooner rather than later.

Why a bigger deposit gives you more options

Although 5 percent is the minimum, larger deposits often open up better mortgage deals. The bigger your deposit, the lower your Loan to Value (LTV). Lenders reward lower LTVs with lower interest rates.

Common deposit levels and what they mean

5 percent deposit (95 percent mortgage)
Great for getting started quickly with a low upfront cost.

10 percent deposit (90 percent mortgage)
This is where you start to see noticeably better interest rates.

15 percent deposit (85 percent mortgage)
Often gives access to more competitive lenders and lower monthly payments.

20 percent to 25 percent deposit (80 to 75 percent mortgage)
This is the sweet spot for some of the very best rates on the market.

The bigger your deposit, the less risk there is for the lender and the more money you save over the full life of the mortgage.

How your deposit affects your monthly payment

A bigger deposit usually means:

• lower interest rates
• lower monthly payments
• more lender options

Even an extra £2,000 or £3,000 added to your deposit can shift you into a better LTV band, which can reduce your mortgage payments over the full term.

Can you use gifted deposits or savings from multiple accounts?

Yes. Lenders accept deposits from a range of sources, including:

• your own savings
• a gifted deposit from a family member
• money held in different bank accounts
• savings held in premium bonds
• proceeds from selling your current home

If your deposit is coming from more than one place, your mortgage adviser will simply tell you which documents to provide.

What if you have a small deposit?

If you only have a small deposit, you still have options. Most lenders offer 95 percent mortgages, and your adviser can help you find the best lender for your situation.

In some cases, family supported mortgages or guarantor mortgages can also help you buy with a lower deposit.

How long does it take to save a deposit?

This depends on your income, rent and savings habits. The fastest way to get a clear answer is to work with a mortgage adviser who can calculate your borrowing power and show you exactly how much you need to save.

Many first time buyers find they can buy sooner than they expected once they understand the real deposit requirements.

Final thoughts

The amount of deposit you need to buy a house depends on your goals, your budget and the types of mortgage deals you want access to. Most people start with 5 percent, but increasing your deposit even slightly can unlock lower rates and save you money in the long run.

If you want to know how much deposit you personally need for your ideal budget, we can give you a clear, simple breakdown and show you what lenders would offer you today.