The minimum deposit for a residential mortgage in the UK is 5% of the property price. On a home worth £250,000, that means you would need at least £12,500. There are a small number of lenders who have offered 100% mortgages in recent years, but these are rare and usually come with strict conditions, such as requiring a family member to act as guarantor.
Your deposit size directly affects your loan to value ratio (LTV). The lower your LTV, the better the interest rates available to you, because the lender is taking on less risk.
| Deposit | LTV | What to expect |
|---|---|---|
| 5% | 95% | Widest choice of deals, but highest rates |
| 10% | 90% | Noticeable rate drop compared to 95% |
| 15% | 85% | Further improvement, more lenders available |
| 25% | 75% | Access to the best rates on the market |
| 40% | 60% | Absolute cheapest deals available |
On a £200,000 mortgage over 25 years, the gap between a 95% LTV rate and a 75% LTV rate could save you over £100 per month.
- Gifts from family: A common option for first time buyers. The person gifting the money will need to sign a declaration confirming it is a gift and not a loan.
- Inheritance: Accepted by all lenders, though they may ask for proof of where the funds came from.
- Sale of another property: The equity you release can be used as a deposit on the next one.
- Savings accounts and ISAs: Including Lifetime ISAs, which add a 25% government bonus on savings up to £4,000 per year.
Important: Lenders need to see a clear trail of where your deposit came from. Large, unexplained deposits in your bank account will be questioned as part of anti money laundering checks.
- Set up a standing order into a dedicated savings account on payday
- Use a Lifetime ISA if you are a first time buyer under 40 for the 25% bonus
- Review your monthly outgoings and cancel subscriptions you no longer use
- Consider whether you can reduce your rent temporarily while you save
- If you receive a pay rise or bonus, put the extra towards your deposit
Not sure how much you need?
We can run through the numbers with you and show you exactly how different deposit sizes affect your monthly payments and the deals available.
Speak to us