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How much deposit do you need for a house

How much deposit do I need for a mortgage?

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Written by  Joe Minihane
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Reviewed by  Jonathan Leggett
5 min read
Updated: 17 Aug 2023

When it comes to buying your first home, it can feel tricky knowing where to start. Our guide for first-time buyers explains how to save for a deposit and work out what you can borrow. Read on to learn more.

What’s the minimum deposit I actually need? 

Before you start looking at properties, you’ll need to save for a deposit which banks require as an assurance or security on the mortgage they lend you.  

Thanks to the government’s mortgage guarantee scheme, it’s possible to get a mortgage with a 5% deposit, with several banks signed up to offer 95% mortgages. The scheme, which sees the government offer guarantees to lenders for the 95% loan, has been extended to June 2025.

That said, there are a limited number of suppliers accepting smaller deposits at the moment. So, you may get a better mortgage deal with a bigger deposit. Some lenders are now offering 100% mortgages, which means you do not need a deposit in certain circumstances. However, these are not as common as they were prior to the 2008 financial crash. Most lenders still require a minimum deposit before approving a mortgage application. 

To work out how much you need to save for a deposit, it may be a good idea to decide how much you can afford to borrow. For a £250,000 property, you’d need to put down the following as a deposit:   

  • 5% deposit: £12,500  

  • 10% deposit: £25,000  

  • 15% deposit: £37,500  

Almost all lenders require you to have a 5% deposit. This means you can make use of the government’s mortgage guarantee scheme 

Couple signing for their first home

What is the average deposit for a first-time buyer? 

According to data released by Halifax in January 2023, the average deposit for a home came in at 21% in 2022. And although house prices are showing signs of falling, the amount you’ll need is still significant, although it varies depending on where you live.  

Average deposits came in at £36.825 in Wales, 18% of the average house price. But were far higher in London at £125,378, around 24% of the average price in the capital.  

Nationally, the average cash amount in 2022 was £62,470, a rise of 8% compared with 2021. The good news is that over half of all loans on home were taken by first time buyers, the highest in the decade. 

How much can I borrow?

The amount you’ll be able to borrow as a mortgage loan will depend on your current debts, outgoings, and incomings. Lenders will look at your salary in the following way: 

  • For single applicants, they’ll usually lend you four times your annual salary. 

  • For joint applicants, it’s generally three times the joint salary or four times the first salary (plus the second salary). 

 It’s worth bearing in mind that, under mortgage market rules, lenders also factor in your personal expenses. These may include bills, debts, and childcare. 

This means they’ll have a more accurate picture of how much you can afford.

But also, the more of these outgoings you have, the less you’ll be able to borrow. Ultimately, lenders need to know you can afford to repay the loan. 

The amount you need to borrow as a first-time buyer can vary widely depending on where you live, as house prices vary by region. The South is generally more expensive than the North when it comes to house prices.  

As of June 2023*, London’s average house price is the most expensive of any region in the UK, with an average price of £527,979. Conversely, the North East has the lowest average house price at £161,034. Nationally, the average price is £287,546  

 * According to the UK House Price Index –GOV.UK  

By looking at your salary, our mortgage calculator can help you work out how much you can afford to borrow.  

Loan to value (LTV)

You’ll usually see mortgages being described as a certain ‘loan to value’ ratio, known as ‘LTV.’

In basic terms, this indicates the percentage of the property’s price that will be covered by the mortgage.

So, if the property purchase price is £300,000 and you have a 10% deposit (£30,000), you’ll need to get a mortgage of £270,000. This means that the loan-to-value ratio of the mortgage is 90%. 

Should I save for a bigger deposit?

With a first-time buyer mortgage, you’re likely to be looking for a 90% or 95% mortgage deal (meaning you’ll need a 5% or 10% deposit saved).

When it comes to borrowing money in any capacity, it all comes down to risk. The bigger deposit you put down, the lower the risk you are to the lender and the more deals you’re likely to be able to access from  providers

Pros

  • The bigger the deposit you can save, the stronger position you should be in. This is because mortgage interest rates are lower at 90% LTV compared to 95%. 

  • A bigger deposit also means a lower  mortgage interest rate, which in turn means lower monthly repayments. 

  • You’ll be at a lower risk of  negative equity if you have a bigger cash deposit to put down. 

Cons:

  • If house prices rise while you are saving up a bigger deposit, the amount you’ve saved is reduced as a percentage of the house value. 

  • You could be paying rent while you wait to buy, which some see as wasting money. 

0% deposit mortgages 

Few mortgage lenders offer 100% mortgages, which is when you borrow the full value of the property and have no cash deposit. However, these have become more common with the recent shift in interest rates.  

In most cases, a 100% mortgage is only available through  guarantor mortgages.  

This means you’ll need a guarantor, usually a parent or guardian, who will be responsible for payment of the mortgage if you are unable to do so.    

You can also take out a family mortgage. Similar to a guarantor mortgage, this usually means a family member retains around 20% of the property’s value in a dedicated savings account, which they cannot touch for a set period. Usually this is for five years. 

 While a 100% mortgage means you don’t need to save for a deposit, it carries bigger risks. If house prices fall, you are at risk of negative equity.  

This is where your home or property is worth less than the amount you’ve borrowed. 

So if house prices were to fall and you borrowed 100% of your property’s value, you could end up in negative equity.  

Can I get a 100% mortgage?

Few mortgage lenders offer 100% mortgages, which is when you borrow the full value of the property and have no cash deposit.

In most cases, a 100% mortgage is only available through  guarantor mortgages.

This means you’ll need a guarantor, usually a parent or guardian, who will be responsible for payment of the mortgage if you are unable to do so.  

 While a 100% mortgage means you don’t need to save for a deposit, it carries bigger risks. If house prices fall, you are at risk of negative equity.

This is where your home or property is worth less than the amount you’ve borrowed.

So if house prices were to fall and you borrowed 100% of your property’s value, you could end up in negative equity.  

How to raise a deposit

  • Lifetime ISAs: With this savings scheme, the government will pay in £1 for every £4 you save. You can invest a maximum of £4,000 a year towards your first home.  

  • Regular savings: Why not set up a direct debit into your savings account? Depositing a fixed amount of cash into a separate account each month means you’re less likely to touch it! The good news is that rising interest rates means you can earn money on your savings pot. 

  • Saving/budgeting apps: There are a number of apps that save your spare cash, which can help you build up a deposit fund. Some of these use AI to save set amounts that won’t leave you broke, either. But bear in mind they don’t usually pay interest on the amount saved.  

  • Assess your living situation: Is your rent too expensive for you to save for a mortgage? Some first-time buyers  move back in with their parents or go into a flat share while they’re saving for a deposit.  

Can I get a deposit from family?

If your family choose to help towards your house deposit, or can pay the whole amount, this is known as a gifted deposit. It’s important to note that this money would be ‘gifted’, not a loan, meaning it wouldn’t need to be paid back.

The family member who gifts you the money wouldn’t get any stake in the property in return either. 

Receiving help towards your deposit from family may mean you have a bigger deposit to put down, which can mean a lower interest rate and lower monthly mortgage repayments.

How much deposit do I need for a house if I’m self-employed?

Tendentially, providers will see self-employed mortgage seekers as riskier to lend to, as their earnings aren’t fixed and are prone to fluctuation.  

 That said, you should be able to benefit from the same deals as any other employed worker. This is especially true if you can prove that you have a healthy, stable set of accounts. 

 As always, paying a larger deposit up-front will open the doors to better, more convenient mortgage offers.

Likewise, if you’ve been out of trade for a while, putting down a bigger deposit will attract more lenders and more favourable deals. In this case, it’s always advisable to engage a specialist mortgage broker to speak directly with lenders about your circumstances. 

Can I use a credit card to fund my house deposit?

Unfortunately, the answer is no. You won’t be able to use your credit card to fund your house deposit.

This is because mortgage providers will want to receive funds from a non-repayable source.  

 What’s more, before agreeing to any deal, lenders will ask to check your credit score and bank statements to view how you manage your finances.

If you happen to have noticeable, outstanding credit card debt, you’re unlikely to receive the offer you wished for. 

Help getting your first home

When you’re a first-time buyer, getting on the property ladder can feel like a struggle – especially with rising house prices.

There are several support schemes and alternative options available to help you get a mortgage, including: 

Help-to-buy scheme

The  help-to-buy ISA was a type of savings account available to open until 2020.

While the scheme is closed for new applicants, if you already have a help-to-buy ISA, you can still use it. You can only deposit £200 a month into the account.

For every £200 saved, the government will contribute a £50 bonus towards your first home. 

 Remember that you’ll only receive the government top-up when you buy a property.

Therefore, you won’t get the 25% bonus if you use your savings to buy something else. 

Shared equity

Shared-equity schemes can offer a way into property ownership when house prices would otherwise be out of reach.

With shared equity, you’re getting a start on the property ladder, but only have a ‘share’ in the property you buy by using a loan for the deposit on your home.

You can then take out a shared-equity mortgage on the part of the property’s value leftover. 

While ‘shared equity’ may give the impression you’re sharing your property with someone else, your home will still belong to you entirely.

The name ‘shared equity’ refers to the taking out of an equity loan which counts towards your deposit. 

Lender schemes

Some lenders have introduced specialist mortgages deals for first-time buyers which only require a small deposit.

Lenders like Lloyds Bank have a ‘Lend a Hand’ mortgage available for first-time buyers who have a deposit of at least 5% saved.

From there, you’ll need a friend or family member known as a ‘helper’. It will be someone who is willing to put up savings of a further 20% of the property value. 

 Other lenders, such as Barclays  and  Yorkshire Building Society, have similar schemes available for first-time buyers who are struggling to get on the property ladder. 

Will I have to pay stamp duty?

Stamp duty is a type of tax you need to pay in England and Northern Ireland if you buy a property or land that costs more than a certain amount.

If you live in Wales or Scotland, equivalent land taxes are applied but the thresholds may vary. More information can be found in our stamp duty guide. 

First-time buyers in England and Northern Ireland don’t pay stamp duty on the first £425,000 of property value, provided the total purchase price is £625,000 or less.

After this, they must pay 5% on the portion of the property's value between £300,001 and £500,000. 

For homes costing more than £625,000, you’ll pay the same stamp duty as someone who has bought before: 

  • 0% on the first £250,000 of property value

  • 5% between £250,001 and £925,000 of property value

  • 10% between £925,001 and £1.5m of property value

  • 12% on the portion of property value above £1.5m 

If you need to work out what you owe, use our stamp duty calculator tool to understand your SDLT liability.

Other costs associated with a mortgage

On top of your deposit and monthly repayments, there are other costs associated with a mortgage that you’ll need to factor in. These include:

Arrangement fee: A mortgage arrangement fee is what you pay for the mortgage product itself, which can cost anything up to £2,000. It’s likely that you’ll be given the option of adding this to your mortgage, which means you can avoid an upfront cost. However, it can increase your payments overall as you’ll pay interest on it. 

Valuation fee: This is where the mortgage provider assesses the value of the property you’re buying to ensure it’s worth the amount they’re going to lend you. Your valuation fee will depend on your property’s value and can cost between £100 and £1,000. 

Booking fee: This is the cost of applying for a mortgage. Some lenders combine booking and arrangement fees, while others charge them separately. For many lenders, this isn’t a refundable payment. So if you change your mind and decide not to go through with the mortgage, you won’t get your money back 

Mortgage account fee:  This is the administration cost of your mortgage for your lender and generally costs up to £300. 

CHAPS: A Clearing House Automated Payment System (CHAPS) covers the cost of your mortgage provider sending funds to your solicitor. This payment is often non-refundable and usually costs up to £50. 

Compare mortgages with MoneySuperMarket

As a first-time buyer, 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. 

The comparison tool doesn’t take into account your financial situation or your credit history.

Therefore, it’s still important to get an agreement in principle. Remember that any monthly repayments and rates you see could change when you apply for a mortgage in principle and a mortgage offer, even once the financial checks have been carried out. 

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

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