How Much Deposit Do You Need to Buy Your First Home?

Saving for your first home can feel like a big challenge, particularly when you're also paying rent and covering everyday living costs. One of the first questions many first-time buyers ask is how much deposit they need before they can apply for a mortgage.

The good news is that you may not need as much as you think. Some mortgages are available with a deposit of just 5% of the property's purchase price, although saving a larger deposit can give you access to more mortgage options and potentially lower interest rates.

In this guide, we'll explain how much deposit you could need, how different deposit sizes affect your mortgage and what other costs to budget for when buying your first home.

What Is the Minimum Deposit for a First-Time Buyer?

Many first-time buyers can apply for a mortgage with a deposit of 5% of the property's purchase price. These are known as 95% loan-to-value (LTV) mortgages because the mortgage covers the remaining 95%.

For example, if you're buying a property for £200,000, a 5% deposit would be £10,000. You would then need a mortgage of £190,000, subject to the lender's affordability checks and eligibility criteria.

However, the minimum deposit available to you will depend on your circumstances, the property you're buying and the mortgage products available. Some lenders may require a larger deposit, particularly if you have a lower credit score, irregular income or other circumstances that affect your application.

Deposit needed at different property prices

For a £150,000 property

• 5% deposit: £7,500

• 10% deposit: £15,000

• 15% deposit: £22,500

For a £200,000 property

• 5% deposit: £10,000

• 10% deposit: £20,000

• 15% deposit: £30,000

For a £250,000 property

• 5% deposit: £12,500

• 10% deposit: £25,000

• 15% deposit: £37,500

For a £300,000 property

• 5% deposit: £15,000

• 10% deposit: £30,000

• 15% deposit: £45,000

These figures cover the deposit alone, so remember to budget separately for legal fees, surveys and other moving costs.

Does a Bigger Mortgage Deposit Make a Difference?

Although a 5% deposit may be enough to get started, putting down a larger deposit can have several advantages.

• Lower monthly repayments: A larger deposit means you need to borrow less, which can reduce your monthly mortgage payments.

• Potentially lower interest rates: Mortgage rates can vary depending on your loan-to-value ratio. A lower LTV may give you access to more competitive deals.

• More mortgage options: Some products are only available to borrowers with a particular deposit size or LTV.

• More equity in your home: You will own a larger share of the property from the outset.

However, waiting several years to save a larger deposit isn't necessarily the right choice for everyone. House prices, rent and mortgage rates can change while you're saving. It's worth comparing the options based on your income, deposit and plans rather than assuming you must save 10% or more before buying.

How Much Would You Need to Borrow?

Your deposit affects how much you need to borrow and your loan-to-value (LTV) ratio. The LTV is the percentage of the property's value covered by your mortgage.

For example, if you're buying a property for £200,000:

• 5% deposit (£10,000): You would need a £190,000 mortgage at 95% LTV.

• 10% deposit (£20,000): You would need a £180,000 mortgage at 90% LTV.

• 15% deposit (£30,000): You would need a £170,000 mortgage at 85% LTV.

• 20% deposit (£40,000): You would need a £160,000 mortgage at 80% LTV.

Your income and regular financial commitments will also affect how much you can borrow. Lenders assess whether you can afford the repayments, taking account of factors such as your existing debts, household spending and credit history.

This means having a deposit isn't a guarantee that you'll be approved for a mortgage. You need to meet the lender's affordability and eligibility requirements too.

How Much Should You Save Before Buying Your First Home?

Your deposit is likely to be the largest upfront cost, but it's important not to use every penny of your savings to buy the property.

Before deciding how much to save, consider:

• The deposit required for properties in your preferred price range.

• Whether your income supports the mortgage repayments.

• Legal fees and the cost of a property survey.

• Mortgage product or arrangement fees, where applicable.

• Removal costs and any furniture or essential repairs.

• Whether Stamp Duty Land Tax applies to your purchase.

• Keeping some savings aside for emergencies after you move.

Working towards a realistic savings target can help you avoid reaching your deposit goal only to discover that you don't have enough left to cover the other costs of buying a home.

Other Costs to Budget for When Buying Your First Home

Alongside your deposit, there are several other expenses to consider.

Solicitor or conveyancing fees

A solicitor or licensed conveyancer handles the legal work involved in buying your property. You may also need to pay for searches and other disbursements. Ask for a breakdown of the total cost before instructing a firm.

Property survey

A survey can identify potential problems with a property before you commit to buying it. The right type of survey will depend on the property's age, condition and construction.

Mortgage fees

Some mortgage products include arrangement or product fees. Depending on the deal, you may be able to pay these upfront or add them to the mortgage, although adding them means paying interest on the fee.

Stamp Duty Land Tax

First-time buyers in England may qualify for Stamp Duty Land Tax relief, depending on the purchase price and the current rules. Eligibility conditions apply, and the thresholds and rates can change, so check the latest guidance before completing your purchase.

Moving and furnishing costs

Remember to allow for removal costs, utility bills, furniture, appliances and any work needed to make the property suitable for you. Even a property that appears ready to move into may require some immediate spending.

Ways to Help Build Your First Home Deposit

If saving a deposit feels difficult, there are a few options worth exploring.

Lifetime ISA

If you're eligible, a Lifetime ISA can help you save towards your first home. You can receive a government bonus on eligible savings, subject to the scheme's rules. There are restrictions on how and when the money can be withdrawn, including conditions relating to the property purchase, so check the requirements before opening an account.

Help from family

Some first-time buyers receive financial help from parents or other family members. Lenders will usually need to understand where the deposit has come from and whether the money is a gift or a loan. A gifted deposit may need to be confirmed in writing, and the lender's requirements will apply.

Shared Ownership

Shared Ownership may be an option for eligible buyers who cannot afford to purchase a suitable property outright. You buy a share of the property and pay rent on the remaining share, subject to the scheme's terms. You will still need to meet the relevant eligibility criteria and account for rent, service charges and other housing costs.

Can You Get a Mortgage With a Small Deposit?

Yes, it may be possible to get a mortgage with a 5% deposit, but the right option depends on your financial circumstances and the property you want to buy.

If you have a smaller deposit, it's particularly important to check your credit history, manage existing debts and understand your monthly budget. You should also consider whether the mortgage repayments would remain affordable if your household expenses increased or your circumstances changed.

If you're self-employed, work on a contract basis or have income that varies from month to month, the evidence required by lenders may differ. Some lenders may be more suitable than others, depending on how they assess your income.

Speaking to a mortgage adviser can help you understand which lenders and products may be suitable before you make an offer on a property.

When Are You Ready to Buy Your First Home?

Having the minimum deposit is only one part of being ready to buy. It's also important to understand how much you can comfortably afford to borrow and whether buying makes sense for your circumstances.

Before moving forward, consider whether you:

• Have enough savings for your deposit and the other upfront costs.

• Understand your likely monthly mortgage repayments.

• Have checked your credit history and existing financial commitments.

• Have a realistic budget for household bills, maintenance and unexpected expenses.

• Expect to stay in the property long enough for buying to suit your plans.

You don't necessarily need to wait until you have a 20% deposit. The important thing is to understand your options and make sure the mortgage and wider costs are affordable for you.

Speak to a First-Time Buyer Mortgage Adviser in Nottingham

If you're saving for your first home, Premier Mortgage Services can help you understand your mortgage options and the deposit you may need. We'll look at your circumstances, explain the options available and help you understand the next steps towards buying your first property.

Find out more about our first-time buyer mortgage advice in Nottingham, or get in touch to discuss your plans.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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