How Much Should I Put Down for a Mortgage Deposit?

How much you should put down for a mortgage deposit will depend on your financial circumstances and goals. While having a larger deposit can be helpful, you don’t always need it to get on the property ladder. Read on to find out your options.

Jim Kersey, Brean Horne Last updated on 17 November 2021.
How Much Should I Put Down for a Mortgage Deposit?

Deciding how much to put down for a mortgage deposit is a key question in the house buying process, especially if you’re a first-time buyer. There is no set amount that you need to save. In fact, the amount of deposit you will need for a mortgage varies depending on your financial circumstances and the property you would like to buy. Here, we explain how to calculate how much you should put down for a mortgage deposit and the best ways to save up your lump sum.

How much should you put down as a mortgage deposit?

There isn’t a magic number when it comes to deciding how much to put down on a mortgage deposit. How much deposit you’ll pay will depend on your financial circumstances and the value of the property that you would like to purchase. And in some cases, you might be able to get a 100% mortgage that doesn’t require a deposit at all, although these will usually require a guarantor of some form.

Most lenders will ask for a minimum deposit of 5% of the property’s value when you apply for a mortgage. However, larger deposits tend to unlock more attractive mortgage deals that charge lower rates of interest.

Researching the types of property you would like to buy can help you get an idea of how much deposit you need to save. For example, if homes in the neighbourhood where you would like to live are around £300,000 a 5% deposit would be £15,000 while a 20% deposit would be £60,000.

Once you have a figure in mind, you can work out how much you can reasonably afford to save and whether it is worth building up a larger deposit to unlock more mortgage deals or whether you would like to get on the property ladder quicker with a smaller deposit but have larger monthly payments.

What is a mortgage deposit?

A mortgage deposit is a cash lump sum you must pay up front when buying a house. The size of this down-payment will affect the interest rates you will be offered on the amount you borrow. As a general rule, the more you can put down as a deposit the lower the sum of money that you’ll need to borrow and pay interest on.

How to save for a mortgage deposit

The first step to saving for a mortgage deposit is knowing exactly what your goal is. Once you have a sum in mind, use the following tips to help you achieve your target:

  • Budget: Creating a realistic budget (that you can stick to) can help you organise your finances and ensure you set enough money aside each month to reach your savings goal.
  • Reduce your rent: Rent tends to be the largest expense. If you live alone, try to reduce it by getting a housemate, by moving into a homeshare or by staying with family until you have saved up enough.
  • Cut back on non-essentials: Reducing how much you spend on non-essentials, such as subscriptions, socialising and holidays, could help you boost your savings towards a mortgage deposit.
  • Shop around for good deals: Always try to shop around for the best deals. Whether it’s utility bills or switching to cheaper brands at the supermarket, every little helps!

» MORE: Tips on how to save for a mortgage deposit

What’s the advantage of having a large deposit?

  1. Better mortgage deals – the larger your deposit, the more likely it will be that lenders will offer you favourable interest rates. This is because a larger deposit means that their risk is reduced against fluctuations in the property’s value.
  2. Less risk – If you own more of the actual property at the start of your mortgage, you are more likely to be able to pay off the loan and reduce the risk of negative equity if the market fluctuates.
  3. Cheaper mortgage repayments – your repayments are calculated on the outstanding amount borrowed from your lender. Essentially, the larger the deposit you put down, the less you will have to pay in monthly repayments because the smaller your loan will be.
  4. Greater chance of acceptance – having a larger pool of money available at the start of the mortgage should mean lenders will be more likely to approve you as a borrower, widening the pool of mortgages you can choose from.

Should I save a large mortgage deposit?

While saving up a large mortgage deposit can help you access cheaper mortgage deals, it might not always be possible or aligned with your house-buying timeline.

For instance, if you already have a 5% mortgage deposit saved, you could shop around for a good 95% mortgage deal, especially if you want to get on the property ladder faster.

It’s worth remembering that however much you decide to save for a mortgage deposit, you will need to put money away for additional costs, such as conveyancing fees, house surveys and stamp duty. You should factor this into the time it will take to save for your deposit.

» MORE: Costs of buying a house: numbers you need to know

How to find the best mortgage deal

Before you start looking for a mortgage, always check your credit score to gauge what deals you might be eligible for. While it is possible to get a mortgage with bad credit, it might be worth taking some time to improve your credit score before applying to unlock better deals.

It is also worth using a mortgage calculator to get a rough idea of how much you will be able to borrow. Once you have this figure in mind, you can start shopping around for a mortgage and the best deal available to you.

If you are a first-time buyer or would like expert help during the process, it may be worth talking to a mortgage adviser or broker. Often, mortgage advisers have access to deals from a wider range of lenders, which puts them in a good position to find the most suitable deal for you.

About the authors:

Jim brings together unique data insights, contextual knowledge and thought provoking themes, to shed new light on important issues affecting both UK businesses and individuals. Read more

Brean is a personal finance writer at NerdWallet. She covers a range of financial topics and has written for consumer titles including Which?, Moneywise and The Motley Fool. Read more

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