How Much Deposit Do You Need to get a Mortgage?

How much deposit you’ll need for a house is something every potential homeowner needs to ask themselves at the start of their property journey.

Having a figure in mind gives you a target to work toward but how do you know if that’s acceptable? And how will the deposit size affect the type of mortgage you could get? This guide breaks down what the typical deposit requirements are and explains how differing amounts can affect your chances of approval.

How much deposit do you need to get a mortgage?

5% of a property’s value is the minimum deposit you could have but very few lenders will be open to such a low amount. The bigger deposit, the better rates and mortgage deals you’ll be able to find as more lenders will be willing to consider your application.

Those who do accept a low deposit will likely have more stringent criteria you’d have to meet. As you climb mortgage deposit percentages to 10%, 15% and above 20%, you’ll have a bigger pool of lenders, and more competitive deals, to choose from. The average house deposit in the UK for first-time buyers in 2021 was 23%.

It’s worth noting that should you have any factors that lenders consider undesirable – such as bad credit or excessive debt – a bigger deposit can help to alleviate some of the risk. A broker would be able to assess your current situation and work with you on a deposit most likely to get you an attractive mortgage loan.

Deposit size examples

The below table gives an idea of how much money you would need to buy houses of various values and what different deposit percentages equate to.

How much do you need to get the best rates?

The best and most competitive interest rates are generally available once you have over 20% as a mortgage deposit. This is considered a good, solid deposit for a house.

But of course, your interest rate isn’t just affected by your deposit. It can also be indirectly impacted by factors that affect your reliability such as your credit history, income type and the property you’re looking to buy as, again, these could raise issues which reduce the number of lenders willing to look at your application.

It’s best to talk to a broker before you begin applying for mortgages as they’ll be able to consult on the type of rate you could expect based on your circumstances and where to go to find the most favourable.

Does a bigger deposit mean you can borrow more?

It’s easy to see why people make this assumption but this is a bit of a myth. The only factors that affect affordability  (the amount you can borrow) are your income and outgoings (and, to a lesser extent, your age at the point you apply).

£100k mortgage deposit example

Having a bigger deposit simply means you don’t need to borrow as much. So, if you choose to buy a property for £100,000 and have a 25% deposit that means you only need to borrow £75,000 versus having to borrow £90,000 if you only had 10%.

Having saved a bigger amount, does mean you could potentially buy a more expensive property. But the money you’ve saved as a deposit, would equate to a lower percentage in this scenario. For example, if you have saved £30,000 this would be 10% of a £300,000 property but 25% of a £120,000 property. That lower deposit rate would make you less attractive to lenders.

Deposit requirements for first-time buyers

Just like with any other type of borrower, if you’re looking to buy a house as a first-time buyer, the more you have saved the further it will go in terms of getting you a better mortgage deal. However, anticipating how difficult it is to save for a deposit, there is a little more support available for first-time buyer deposits.

The Government Starter Homes Scheme, for example, discounts a new build home by between 30% and 50% reducing the size of a deposit needed. To hear more about the full suite of schemes available for deposit support, talk to a specialist broker.

How a broker can make your deposit funds go further

Whether you have 5% or 50% saved as a deposit, at a time when mortgage rates are increasing, expert help is vital in ensuring you’re getting the best deal currently available. A broker would be able to:

• Assess your wider financial picture, the property type and area you’re looking to buy in and suggest how much you need to save as a house deposit.
• Advise on whether you’re eligible for any government mortgage deposit schemes that could boost your deposit amount.
• Verify the origins of your deposit and help you compile the paperwork to prove where it’s come from, speeding up and simplifying the application process.

How much you need to get a buy-to-let (BTL) mortgage

If you plan to buy and rent out a property, most lenders will stipulate that you have a minimum deposit of 25%. Other providers may extend that as high as 40%. This is because BTL mortgages are perceived as more risky and having more investment from the applicant demonstrates a level of reliability. If you don’t quite have the 25%, talk to a broker as there can be some lenders willing to make exceptions for those with a 15% deposit.

Get matched with the right mortgage broker to make the most of your deposit

Whether you’re a first-time buyer, a buy-to-let borrower or holiday homeowner,

you want more than generic deposit advice. A broker is able to familiarise themselves with all the nuances of your particular financial situation and, from there, consult on how much deposit you need to buy the house you want.

Our broker matching service can see you quickly connected to an expert able to share how to get the most out of your deposit and where to start in your path to property ownership. Just call 0808 189 2301 or fill out this enquiry today and you can take advantage of an initial free consultation.