1. Home
  2. Mortgages
  3. How Much Do You Need for a House Deposit?
Published 15 August 2022

How Much Do You Need for a House Deposit?

How much deposit you need to buy a house will depend on your financial situation and the value of the property you want to buy. Having a larger deposit might help secure a lower mortgage rate, but a house deposit of 5% is often enough to help you onto the property ladder.

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 possible to try to build up a larger deposit to unlock more mortgage deals. Alternatively, you might want 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:

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

What are the advantages 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 of buying a house, such as conveyancing fees, house surveys and stamp duty. You should factor this into the time it will take to save for your deposit.

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 Kersey

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 Horne

Brean was a writer and spokesperson for NerdWallet who covered a variety of topics including money-saving tips, credit scores and managing debt. With over five years' experience in finance, she…

Read More
Dive even deeper
March Mortgage Rates May Have Room to Fall Further

March Mortgage Rates May Have Room to Fall Further

Fixed-rate mortgages could head lower, but a further Bank of England base rate increase could see variable rate mortgages rise again. Read on to find out mortgage rate predictions for March.

How I Bought My First Home In South East London

How I Bought My First Home In South East London

From saving up a deposit to finding the perfect home in South East London, we follow a recent first-time buyer in our My First Home series.

Is it Better to Pay Off Your Mortgage or Save?

Is it Better to Pay Off Your Mortgage or Save?

With savings rates finally paying some semblance of a decent return, deciding whether it’s better to pay off more of your mortgage or put your spare funds into a savings account has got a little harder. Here’s what you need to consider.

Back To Top