How Much Deposit Do I Need as a First-Time Buyer?
“How much deposit do I actually need?”
It’s a sensible question, particularly when you’re trying to work out whether buying your first home is realistically within reach.
The good news is that you don't necessarily need a huge deposit to get started. In many cases, a 5% deposit can be enough to secure a mortgage, although the amount you need will depend on the property you're buying, your circumstances and the mortgage options available to you.
Having a larger deposit can also give you more options, so it's worth understanding how the different levels of deposit can affect your mortgage.
Can I buy a home with a 5% deposit?
In many cases, yes.
For example, if you're buying a £250,000 property:
A 5% deposit would be £12,500
A 10% deposit would be £25,000
A 15% deposit would be £37,500
A 20% deposit would be £50,000
The important thing to remember is that your deposit isn't the only factor a lender considers.
I've spoken to plenty of first-time buyers who assume that because they only have a 5% deposit, getting a mortgage will be difficult.
That isn't necessarily the case.
The lender will also look at your income, expenditure, credit history, employment circumstances and the property you're looking to buy.
Does a bigger deposit mean a better mortgage?
Generally, having a larger deposit can give you access to a wider range of mortgage options.
This is because your deposit reduces the amount you're borrowing in relation to the value of the property.
For example, a £250,000 property with a £12,500 deposit would require a £237,500 mortgage. That's a 95% loan-to-value (LTV).
With a £25,000 deposit, you'd need a £225,000 mortgage, giving you a 90% LTV.
If you could put down £50,000, you'd only need to borrow £200,000, giving you an 80% LTV.
As the LTV reduces, you may find that more mortgage products become available and, depending on the market at the time, the interest rates available may also improve.
However, this doesn't mean you should automatically put every penny you've saved into your deposit.
Don't use every penny you've got
This is something I discuss with first-time buyers quite a lot.
It's easy to think:
“I've got £30,000 saved, so I'll put £30,000 towards the house.”
But buying a home comes with other costs.
You may need money for:
Solicitor's fees
Mortgage fees
Surveys
Removals
Insurance
Stamp Duty Land Tax, where applicable
Furniture and other costs once you move in
Unexpected expenses
I've seen first-time buyers get so focused on reaching a particular deposit percentage that they forget about what happens after they've collected the keys.
Having a financial buffer can be just as important as getting the mortgage itself.
What if I haven't saved a deposit myself?
This is another situation I come across regularly.
Some first-time buyers receive help from parents or other family members, either through a gifted deposit or financial assistance towards their purchase.
There are lenders that will accept gifted deposits, but there are usually requirements around who the money is coming from and confirmation that it doesn't need to be repaid.
It's important to discuss this with your mortgage adviser early rather than assuming every lender will treat the gift in exactly the same way.
Is a 10% deposit better than a 5% deposit?
Potentially, but it depends on your circumstances.
If you have £25,000 available and you're buying a £250,000 property, you could potentially put down a 10% deposit.
But if saving another £12,500 to reach a 15% deposit would mean waiting several years, it may not necessarily make sense to delay your plans simply to reach the next deposit bracket.
I've had conversations with clients where the question wasn't simply “How can we get the biggest deposit possible?”
It was:
“What deposit allows us to buy a home while still leaving us financially comfortable?”
That's a much more useful way of looking at it.
Don't forget the costs outside of your deposit
Your deposit is likely to be the biggest upfront cost, but it isn't the only one.
Before you start viewing properties, it's worth understanding the full amount you'll need to have available.
For example, you may need to account for:
Deposit + purchase costs + moving costs + emergency savings
The exact amount will vary from one person to another, but having this conversation early can prevent some nasty surprises later.
So, how much deposit do I need?
For many first-time buyers, 5% can be enough to get started, but that doesn't necessarily mean it's the right deposit for you.
A 10%, 15% or 20% deposit could potentially give you access to different mortgage options, but you also need to consider your monthly payments, other buying costs and how much cash you want to keep available after moving.
There isn't a single “right” deposit for everyone.
The best starting point is to understand what you can realistically afford, what mortgage options may be available and what your monthly payments could look like.
Thinking about buying your first home?
If you're a first-time buyer and you're not sure whether you've saved enough, don't assume you need to wait until you've got a huge deposit.
Use our mortgage affordability calculator to get an initial idea of what you could potentially afford, or speak to Matthew Bugden Mortgages about your circumstances.
Having a clear idea of your budget early on can make the whole process of buying your first home feel much more manageable.
The information provided is for general guidance only and does not constitute mortgage advice. Mortgage availability and affordability are subject to individual circumstances, lender criteria and the information available at the time of application. Your home may be repossessed if you do not keep up repayments on your mortgage.