Buying your first pad is a big deal and involves a big chunk of money. So we’ve explained everything you need to know about mortgage deposits below, without the big sell.
We’ll explain what house deposits are, how they work, the minimum you can put down, and how to get better rates.
What’s a mortgage deposit?
It’s a lump sum you pay upfront when you’re buying a home. Then you get a mortgage to pay for the rest.
The bigger the deposit you put down, the better mortgage rates you could get. So, working out how much you can afford early on is a great thing to do.
Think of your deposit as your first bit of ‘equity’ too. That’s the precious part of your property you own outright from the get-go.
How does a mortgage deposit work?
The mortgage deposit is paid through your solicitor (and goes to the seller) when you exchange contracts. Deposits on first homes are typically between 5% and 20% of the property price agreed, but some lenders offer mortgages with deposits less than 5%.
Your lender needs to know how much deposit you’ve got when you apply for a mortgage. It helps them work out how much to lend you.
Your deposit also determines your loan to value (LTV). This is the amount you’re borrowing compared to how much the home’s worth.
So, if you’re buying a house for £200,000 with a 10% deposit, you’ll put down £20,000 upfront and your LTV will be 90%. The bigger your deposit, the lower your loan to value. Simple.
What’s the minimum deposit for a mortgage?
Many lenders ask for a minimum deposit of 5% (95% LTV). So, your deposit will need to be at least 5% of the property price.
But don’t panic if you’re struggling to save 5%. You might be able to get one of our low deposit mortgages on your first home. With My First Mortgage you could get on the ladder with a £10,000 deposit on houses up to £500,000. So, check it out if this seems like a great fit for you.
Not sure what you can afford yet? Our mortgage calculators can give you a ballpark figure. They’ll tell you how much you could borrow and the deposit you’ll need to put down.
Keep in mind that how much you need for a mortgage deposit also depends on your finances, income and credit rating. So, there are a few factors in the mix.
How much deposit should you put down?
The minimum deposit for a mortgage and what you should put down are 2 different questions. Lots of people can get a mortgage with a 5% deposit. But if you want the best mortgage rates, it pays to put down a larger deposit.
So, instead of asking ‘how much deposit do I need?’, ask yourself how much you can comfortably afford. And don’t forget to put aside money for legal fees, removal costs, storage and stylish new furniture to impress your friends.
Finally, it’s worth checking out the different government schemes. These could help you afford a bigger deposit and boost your borrowing power.
Calculate your mortgage payments
See how much you could borrow and what your monthly payments might be.
How does having a higher deposit help me?
The more you put down as a mortgage deposit, the more attractive you are to lenders:
- you’re more likely to get a mortgage offer
- you’re more likely to get better rates
- your monthly payments could be lower
- you’ll have more equity from the off.
The last bit’s important if house prices go down. You don’t want to end up in negative equity where you owe more on your mortgage than your home’s worth. A bigger deposit gives you greater protection against negative equity.
What’s an average first time buyer deposit?
Last year, the average first time buyer with Santander put down a deposit of more than £85,000. But don’t forget that house prices vary across the country. So that average could be higher or lower in your area.
But you won’t always need to put down this much. There are lots of low deposit mortgages out there. In fact, you might be able to get your hands on your first pad with a £10,000 deposit with us.
How much can you borrow using your mortgage deposit?
The bigger your deposit, the more you could borrow. But other factors come into it too:
- how much you earn per year
- your credit score
- whether you’ve got other debts
- how much you spend
Basically, lenders want to feel confident you’ll pay back whatever you borrow. And a larger deposit gives them greater confidence.
Got your deposit ready? Then take the next step and get a decision in principle. It’s quick, easy and shows sellers you’re ready to buy.
How to save for a mortgage deposit
Saving for a home deposit isn’t easy — we’re talking thousands of pounds — but it’ll seem much simpler if you break it down into little steps.
For starters, work out how much you need for a home deposit and set yourself a realistic savings plan. My First Home in our Mobile Banking app could help here. You can set a goal and then track your progress over time.
We’ve also got plenty of savings accounts and ISAs that could help too, including limited access ones with higher rates and ones where you can get your hands on your cash anytime. Our First Home Saver is especially worth a look.
You could even set up regular payments each month, so you build your savings automatically. Ringfencing some of your monthly income for a deposit is a great way to stay on target.
Look at your spending, too. For example, My Home Manager in our Mobile Banking app has all the latest energy, broadband and TV offers. You can compare deals and then switch in-app. You’ll also find handy tips to save.
Ask yourself if you could cut back on luxuries for a while too. Going without takeaways is tough when you’re craving a chow mein, but life as a homeowner will taste even better.
Can you get a mortgage without a deposit?
Sometimes but not with us. They’re pretty rare and it depends on your circumstances.
No deposit mortgages, also called 100% mortgages, usually come with higher interest rates. You might need a guarantor too. This is someone who’ll pay back the loan if you can’t.
More info about mortgage deposits
Got questions? If something’s on your mind — like ‘how much deposit do I need?’ or ‘can I borrow money for my deposit?’ — we’ve got the answers below.
There’s no quick fix if you’re starting from scratch. But lots of things can help you save faster. For example, you can cut back on non-essential spending, pay off debts, and tuck away more cash each month.
You could check out the different government schemes too. Maybe you qualify? And look at the different investments out there to help your savings grow quick-smart.
Sure. Lots of buyers get family help with their mortgage deposit. So, if Mum, Dad or a generous Gran want to gift you a deposit, then lucky you.
They can either give you some or all of the money. Just make sure they know that it’s non-refundable and they won’t have a claim on your home.
We even accept gifted deposits from friends in some situations. Other lenders might not offer this option though.
Yes. But it should be easier to raise the money than it is for first time buyers, especially if you’re selling a home at the same time. You can use the equity in your current home to pay for the deposit on your new one. You can top it up with savings if you need to.
You can sometimes use a loan but don’t bank on being able to use your overdraft. Lenders usually rule this out.
Even if it’s a loan, your lender will need to include the money owed in their calculations. And they might decide you can’t afford mortgage payments on top.
Our BTL mortgages are only available to new customers through a broker. The deposit would normally need to be around 25% of the property’s value. So, a bit larger than your regular mortgage.
The exact amount you need to put down depends on the property price. Here’s the lowdown on our own Buy to let mortgages. Your broker can tell you if they’re suitable for you.
With most lenders, you’ll need a minimum 5% mortgage deposit if you’re buying a new build or flat. So you won’t be able to get one of our 2% deposit mortgages, for example. But you can still apply with a 5% deposit.
Not always. Instead, lenders like to look at everything including the deposit you’ve got, whether you have any other debts and your credit rating. They’ll also want to know if your job’s permanent.
Some mortgages are different though. For example, you’ll need a salary of at least £25,000 for a Buy to let mortgage from us.
Mortgage Calculators
See how your deposit could impact the amount you can borrow.
Need more help?
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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Applications are subject to status and lending criteria. Applicants must be UK residents aged 18 or over. The amount we will lend depends on your circumstances, the amount borrowed and the property. A higher deposit may be required for a flat or new build.