How Much Deposit Do I Need to Buy a House?

When you take out a mortgage, you’ll need to put some money down upfront - known as a deposit. This cash lump sum goes towards the cost of the property you want to buy. The bigger your deposit, the less you'll need to borrow and the lower your monthly repayments will be.

How much deposit you'll need to put down depends on how much the property is worth. A lender will then factor in your deposit when deciding how much you can afford to borrow.

Getting a mortgage can be a stressful experience. It’s especially daunting if you’re worried about being able to save for a deposit. In this guide, you’ll find all you need to know about mortgage deposits and what your options are if you can’t save a lot of money.

How much deposit do you need for a mortgage?

Generally, at least 10% to 15% of a property's value is considered a good, healthy deposit for a mortgage, but it’s possible to get a mortgage with as little as 5% deposit. So, if you bought a house for £250,000, in actual money this would mean:

• £12,500 (5%)

• £25,000 (10%)

• £37,500 (15%)

Why is a bigger deposit better?

Putting down more money upfront is beneficial for a few reasons. Firstly, it lowers your Loan to Value (LTV) which means you’re asking to borrow less and your monthly repayments will be lower. Secondly, it shows a bigger commitment to a mortgage lender, and can unlock better mortgage deals with lower interest rates.

Having a big deposit doesn't necessarily mean you’ll be able to borrow more money (that depends on the results of your affordability checks) but your monthly payments should be lower because you'll have a smaller loan from the start.

What’s the average mortgage deposit in the UK?

For first-time buyers, the average deposit paid for a house in the UK is just under 15%. For home movers it’s higher, at around 25%. As you move from one home to another, the equity in the house you’re selling is used for a deposit, which is why the average home mover deposit is higher than for first-time buyers who don’t have any existing equity to fall back on.

Do I need a bigger deposit if I have bad credit?

Some mainstream lenders might ask you to put down a bigger deposit if you have bad credit. However, there are specialist lenders offering mortgages for people with bad credit without necessarily having to put down a large deposit. The deposit you’ll need depends on the type of credit issue you’ve had, when it happened and how much it was for.

These specialist lenders aren’t the big banks you see on the high street. And their mortgages aren't usually available directly to you as a borrower, you'd need to go through a mortgage broker.

Our Mortgage Experts will look at your options and find the right mortgage for you at a deposit level you can afford. They’ll prepare your application so it looks as strong as possible to a lender. If you're worried about bad credit affecting your mortgage deposit, get in touch to speak with us.

Do I need a bigger deposit if I’m self-employed?

No, not necessarily. Mortgage lenders don’t ask for more deposit, based purely on your employment status. If you’ve been self-employed for three years or more and can provide proof of income that shows a healthy business profit, you should qualify for the lower deposit deals available.

However, if you’re only recently self-employed, a contractor or freelancer, this may narrow down the number of mortgage lenders willing to offer you a mortgage as your income may be harder to verify. In such cases, you might be asked to put down a larger deposit to alleviate any potential risk the lender feels they may be taking.

Making sure your finances are in order and being able to provide a good deposit will help you to have as many options open to you as possible. 

Deposits for second homes

When buying a second home, you might be asked to pay a bigger deposit - usually at least 25%. You may also be asked to pay a higher interest rate. Second home mortgages work the same way as regular mortgages, but with much stricter lending criteria, as you’ll need to prove you can afford two mortgages.

Deposits for buy-to-let properties

You'll likely have to put down a minimum deposit of around 20% for a buy-to-let mortgage. As with residential mortgages, putting down a bigger deposit unlocks the better interest rates. Mortgage lenders consider rental properties as higher risk than residential as there’s the possibility the property could be vacant at times, meaning no rental income to pay the mortgage repayments. For this reason buy-to-let mortgages usually carry higher deposits.

Can I get a mortgage without a deposit?

0% deposit mortgages are not completely impossible but they are currently extremely rare with just one mortgage lender in the whole of the UK offering them, with much more rigid affordability checks and lending criteria attached. Only applicants with a perfect credit score, high levels of disposable income in relation to the mortgage repayments and a strong employment record would be deemed acceptable.

Once the economic conditions have returned to a more stable footing at a national level it’s possible more mortgage lenders could offer 100% mortgages. At the moment that’s not the case.

If you don’t have a deposit and need a mortgage, you could consider a guarantor mortgage, which can potentially be available with a 0% deposit as the guarantor’s financial assets (usually their property) can be used as security for the loan instead.

This is a serious commitment, as your guarantor's home will be at risk of possible repossession if both you and they can no longer afford the repayments for the guarantor mortgage. 

Can I get my mortgage deposit back? 

Not really. When buying a home, you can back out from the process at any time. However, after you’ve exchanged contracts then you’ll lose your deposit if you don’t go ahead. 

Once the purchase has gone through, you won’t get your deposit back. It’s a down payment that goes towards your ownership of the property - it’s a big commitment. However, if later on you decide to release some equity from your home (and your house hasn’t decreased in value), or you sell it at a profit, then you can get some or all of that money back to put towards something else.

Do I need a deposit when remortgaging?

When it comes to remortgaging, you won’t need to save for another deposit. You can use the equity you already have in your home as a deposit.

Equity is the cash difference between how much your home is worth, and how much you have left to pay on your mortgage. Let's say you sold your house for £500,000 with £300,000 still left to pay on your mortgage. Your equity would be £200,000. You won't have equity from an interest-only mortgage unless your house has gone up in value.

Do I need a deposit when moving home?

When buying your next home, you'll need a new mortgage. You can move your existing mortgage over to the new property (called 'porting'). If the new property is more expensive than your current home, you'll need to reapply to borrow more money. If you have equity in your current home, you can use this as a deposit for the next property. 

What if I can’t save for a big deposit?

If you can’t save up for a big deposit, there are some options available to get you on the property ladder:

• Shared Ownership means you buy part of a property and rent the rest. You take out a mortgage on the bit you're buying, then pay a reduced rent on the bit you don't own. You’re able to buy between 25-75%, and can buy some or all of the remaining share when you can afford to.

• Right to Buy was set up in the 1980s, and gives you the opportunity to buy your council home for a discounted price. Most lenders will accept your discount in place of a deposit, but it's only available in England.