How to raise a deposit for a home

Written by Emma Lunn

5 min read

Updated: 04 Apr 2024

In this guide / article

Rising house prices mean first-time buyers often need to put down tens of thousands of pounds as a deposit – this can present a massive hurdle to getting on the housing ladder. Unless you have a very high salary or are lucky enough to have family prepared to stump up the cash on your behalf, that means saving hard.

Key takeaways

First-time buyers normally need at least a 5% deposit, but aiming for 10% or more is better as larger deposits can mean being eligible for cheaper mortgage deals
A Lifetime ISA (LISA) is a government-backed savings account, intended to help you afford your first home (or fund retirement), with the state adding a 25% bonus a year (max £1,000) on top of your savings
Cash ISAs, fixed-rate bonds, and certain current accounts are also good savings options
Start saving early, choose the right savings options, and use comparison tools to find the best mortgage deals

Buying a home is a significant milestone in many people's lives, but it can also be one of the most challenging financial hurdles to overcome. One of the first steps in this journey is saving for a property deposit.

How much deposit do I need for a mortgage?

First-time buyers normally need at least a 5% deposit – but saving a bigger deposit will mean you have more mortgage options. For the best mortgage rates on the market, you need a deposit of 40% or more.

Deposits are per property, not per person. So, if you buy a property with someone else you can probably save a bigger deposit between you. Many first-time buyers receive help with their deposit from their parents.

In the past there have been various Government-backed schemes – such as Help To Buy – to help first-time buyers get on the ladder with smaller deposits.

Help To Buy is now closed to new applications in England and Scotland, but it is still available in Wales until September 2026.

Some lenders also offer special mortgage deals to first-time buyers.

What is the best way to save for a house deposit?

The best way to save a house deposit is using a Lifetime ISA. A Lifetime ISA is a government-backed initiative designed to encourage people to save for two significant life events: purchasing their first home and retirement.

LISAs are available as stocks and shares ISAs or cash ISAs.

You can save up to £4,000 a year in an ISA and this makes up part of your overall £20,000 a year ISA contribution limit.

For every £4 you save in a Lifetime ISA, the government adds £1. The maximum bonus you can get each year is £1,000.

To open a Lifetime ISA you need to be over 18 but under the age of 40, and you can add funds up until your 50th birthday. You’ll lose the government bonus if you withdraw funds from your Lifetime ISA for any other reason other than to buy a home or fund your retirement post-60.

If you save the maximum amount permittable, £4,000 a year, into a Lifetime ISA from the age of 18 to 50, you’ll get a total of £32,000 from the government.

Lifetime ISAs can only be owned individually. But if you buy a house with someone else, you can use both of your Lifetime ISAs for the purchase.

The property you buy with funds from a Lifetime ISA must cost £450,000 or less, and you must live in the property (not intend to rent it out).

Can I get a 95% mortgage?

Some mortgage lenders offer 95% mortgages to borrowers with just a 5% deposit. It was difficult to get a 95% mortgage during the pandemic, but lenders have started lending at this LTV again.

Many homebuyers have taken out a 95% mortgage under a government initiative called the Mortgage Guarantee Scheme. This was launched in April 2021 and allows buyers to borrow between 91% and 95% of the property value, by putting down a deposit of between 5% and 9%.

The Government then provides a guarantee to mortgage lenders to encourage them to offer high loan-to-value (LTV) mortgages.

But the scheme will close on 30 June 2025 – you need to apply before this date to use it.

Previously a scheme called the Help To Buy mortgage guarantee worked in a similar way – but it ended in 2016.

Post credit-crunch lending

Since the credit crunch, banks and building societies have been more cautious with their lending.

Prior to 2008 many people took out 100% – or higher – mortgages. But this ended badly when many people couldn’t afford to pay back their home loans.

In general, a larger deposit can reassure lenders, granting you access to more affordable mortgage deals.

Don't forget to budget for other costs such as stamp duty, moving costs, and legal fees.

Deposit requirements for different buyers

Deposit requirements can vary from lender to lender.

You might need a bigger deposit if:
You have a poor credit score

You plan to let the property as a buy-to-let landlord

Some lenders offer guarantor mortgages where another person, normally a parent, promises to repay the loan if you can’t pay.

Where to save for your deposit

A Lifetime ISA is the best place to save for your home deposit. This is because the Government gives you a 25% bonus on your savings, up to £1,000 bonus a year.

You can save £4,000 a year into a Lifetime ISA. Once you have reached the limit, these are other good savings options:

Be aware that many easy access accounts come with bonus rates that expire after a year or so. At that point, you’ll have to move your cash or suffer a plummet in returns. You can compare easy access savings accounts on our page.

Fixed-rate bonds offer better interest rates for those who can commit to not touching their savings for a set period – i.e. if you don’t plan to buy a home for a year or two.

Current accounts sometimes offer competitive interest rates on balances up to a certain limit.

Mortgage repayment warning

It's important to remember that failing to keep up with mortgage repayments can result in the repossession of your home. Always ensure that you're financially prepared for the commitment of a mortgage.

If you buy a house with someone else you’ll both be jointly and severally liable to repay the mortgage loan to the lender. The lender can pursue either of you for the loan, not just your ‘half’. So, only buy a home with someone you trust regarding finances.

A warning that your home may be repossessed if you do not keep up repayments on your mortgage.

Finding the right mortgage

Using a mortgage comparison tool can help you get a good idea of the kind of mortgage deals available. When you enter your information into MoneySuperMarket’s mortgage comparison tool, you’ll be able to compare example mortgage quotes from different providers.

Just tell us a bit about yourself, your financial situation, and your plans. We’ll help you scour the market in search of the mortgage deal that is right for your budget and requirements.