Everything a First Time Buyer Should Know About Their Mortgage Deposit
Buying your first home is exciting, but saving for a deposit can feel overwhelming. This guide breaks down everything you need to know—from how much you’ll need to save, to clever ways your family can help.
What Is a Mortgage Deposit?
Simply put, your mortgage deposit is the chunk of money you pay upfront when buying a home. The rest comes from your mortgage lender.
Think of it as your stake in the property. The bigger your deposit, the less you need to borrow—and the better deals you’ll typically get.
How Much Deposit Do You Actually Need?
Most first-time buyers need between 5% and 20% of the property price. But what does that actually mean in real money?
Let’s say you’re looking at a £200,000 home:
| Deposit % | Amount Needed | You Borrow |
|---|---|---|
| 5% | £10,000 | £190,000 |
| 10% | £20,000 | £180,000 |
| 15% | £30,000 | £170,000 |
| 20% | £40,000 | £160,000 |
The percentage you put down affects your Loan-to-Value (LTV) ratio. A 5% deposit means 95% LTV—you’re borrowing 95% of the home’s value. Lower LTV ratios typically unlock better interest rates.
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Why a Bigger Deposit Pays Off
We know saving more takes longer. But here’s why it’s often worth the wait:
Benefits of a Larger Deposit
- Better interest rates — Even 0.5% lower can save thousands over your mortgage term
- Lower monthly payments — Borrow less, pay less each month
- More mortgage options — Lenders offer their best deals to lower-risk borrowers
- Easier approval — Shows lenders you’re financially responsible
- More equity from day one — You own more of your home outright
Understanding Deposit Bands (LTV)
Mortgage lenders group deposits into “bands” that determine your interest rate. Here’s how it works:
- 95% LTV (5% deposit) — Higher rates, but gets you on the ladder
- 90% LTV (10% deposit) — Slightly better rates, more options
- 85% LTV (15% deposit) — Good balance of affordability and savings
- 80% LTV (20% deposit) — Sweet spot for competitive rates
- 75% LTV (25% deposit) — Best rates typically available here
What About 100% Mortgages?
Dreaming of buying with no deposit? Unfortunately, true 100% mortgages are extremely rare since the 2008 financial crisis.
Most lenders now require at least 5% down. The risk is simply too high for them otherwise—if house prices drop, they could lose money.
However, there are alternatives if you can’t save a deposit yourself…
Family Support Options
Family helping first time buyers with mortgage deposit UK
Guarantor Mortgages
A family member guarantees your mortgage, taking responsibility if you can’t pay. They don’t give you money—they provide security.
Family-Assisted Mortgages
Your family contributes to your deposit or offers their savings as security, without becoming full guarantors. Less risky for them, helpful for you.
Springboard Mortgages
Parents place savings in a linked account with the lender. This acts as security for your mortgage. After a set period (usually 3-5 years), they get their money back—often with interest.
Using Gifted Deposits
If family members want to simply give you money for your deposit, that’s absolutely allowed. But you’ll need proper documentation:
- A gift letter — Stating it’s a gift, not a loan
- Proof of funds — Bank statements showing where the money came from
- Relationship details — Who’s giving the gift and their connection to you
Lenders want to ensure you won’t have to repay this money, which would affect your affordability.
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Other Things to Consider
Your deposit is crucial, but it’s not the only factor lenders consider:
Your Credit Score
A good credit history opens doors to better deals. Check your score before applying and fix any errors.
Existing Debts
Student loans, credit cards, car finance—these all affect how much you can borrow. Try to reduce debts before applying.
Emergency Fund
Don’t put every penny into your deposit. Keep savings for unexpected repairs, moving costs, and those first few months of homeownership.
Additional Costs
Budget for stamp duty (if applicable), solicitor fees, surveys, and moving expenses. These can add thousands to your total costs.
Your Step-by-Step Deposit Checklist
- Set your budget — Work out what you can realistically afford
- Choose your target deposit — Aim for at least 10% if possible
- Identify your sources — Savings, family help, government schemes
- Get mortgage pre-approval — Know exactly what you can borrow
- Gather your documents — Payslips, bank statements, ID ready
- Compare deals — Don’t just go with your bank—shop around
Ready to Take the Next Step?
Understanding your mortgage deposit is just the beginning. The size of your deposit and where it comes from can significantly impact your mortgage options and monthly costs.
Everyone’s situation is different. That’s why getting personalised advice from a qualified mortgage adviser is so valuable—they can help you find the best deal for your specific circumstances.
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