What’s the Minimum Mortgage Deposit You Actually Need? A Guide for First-Time Buyers

Getting onto the property ladder in the UK means answering one big question: how much deposit do you need? If you’ve been saving and wondering when you’ll have enough, this guide will give you the real answer.

Let’s break down everything about the minimum mortgage deposit, how it affects your mortgage options, and what you can expect as a first-time buyer.

The Minimum Mortgage Deposit Explained

The minimum mortgage deposit in the UK is 5% of the property’s purchase price. But there’s more to the story.

A 5% deposit is the technical minimum. It doesn’t mean it’s always available or the best choice for your situation. The amount you can borrow and your interest rates are directly linked to your deposit size. The more you put down, the better deals you’ll get.

Here’s what different deposits look like on a £200,000 property:

• 5% deposit: £10,000
• 10% deposit: £20,000
• 15% deposit: £30,000

Each deposit level unlocks different mortgage products with different interest rates and terms.

 

Why Your Deposit Size Changes Everything

Your deposit size affects more than whether you can get a mortgage. It changes the entire range of deals available to you. First-time buyers need to understand this relationship.

Understanding Loan-to-Value Ratios

Lenders use something called the loan-to-value ratio, or LTV. This is the percentage of the property value you’re borrowing.

• 5% deposit = 95% LTV
• 10% deposit = 90% LTV
• 15% deposit = 85% LTV

The lower your LTV, the better your options. At 95% LTV, lenders see you as higher risk. You have less money invested. They charge higher interest rates and offer fewer products. Drop to 90% or 85% LTV, and more lenders will compete for your business with better rates.

What the Interest Rate Difference Costs You

Numbers matter here. On a £200,000 mortgage over 25 years, the difference between a 95% LTV rate and a 90% LTV rate could cost you £100 to £150 more per month. That’s thousands over the full mortgage term.

Many first-time buyers who could technically buy with 5% choose to save longer to hit 10%. Yes, it delays your purchase. But it saves you serious money long term.

Special Schemes for First-Time Buyers

Several government schemes exist to help first-time buyers with deposits.

The Mortgage Guarantee Scheme

This government-backed scheme helps first-time buyers and home movers purchase properties with just a 5% deposit. The government provides a guarantee to lenders, encouraging them to offer 95% LTV mortgages.

The scheme covers properties worth up to £600,000. It doesn’t reduce the minimum mortgage deposit you need, but it increases the number of lenders offering 95% mortgages. This gives you more options and potentially better rates.

Lifetime ISA Bonus

The Lifetime ISA helps you save for your first home. You can save up to £4,000 per year, and the government adds 25% on top.

Save the maximum £4,000, and you get an extra £1,000 free. Do this for four years, and you’ll have £20,000 saved plus £4,000 in government bonuses.

The rules: you can only use it to buy your first home (up to £450,000) or for retirement. Withdraw for any other reason, and you’ll pay a penalty. For dedicated first-time buyers, it’s free money towards your deposit.

Shared Ownership

Shared ownership lets you buy a share of a property (typically 25% to 75%) and pay rent on the rest. You calculate the minimum mortgage deposit on your share, not the full property value.

Example: you buy 50% of a £300,000 property. You’re actually buying £150,000 worth. A 5% deposit would be £7,500 instead of £15,000. This helps first-time buyers who struggle to save larger deposits.

How Much You Should Actually Save

5% is the minimum mortgage deposit, but aiming higher improves your position significantly. Here’s what different deposit levels mean.

The 5% Reality

With 5% down, you face limited choice and higher rates. Some lenders won’t offer 95% mortgages at all. Those that do have stricter criteria.

You’ll need:

• Clean credit history
• Stable employment
• Strong income verification

Your monthly payments will be higher. You’re borrowing more, and the interest rate is higher. You’re also starting with very little equity. If house prices drop, you could quickly end up in negative equity.

The 10% Target

Many mortgage advisors recommend 10% as the realistic target for first-time buyers. At 90% LTV, you’ll find significantly more lenders, better interest rates, and more flexible terms.

The application process runs smoother. You have a small equity cushion from day one. For most people, this balances not waiting forever with securing decent mortgage terms.

The 15% Advantage

Stretch to 15%, and you enter prime borrower territory. Interest rates drop noticeably. You get access to the best market deals. Lenders will compete for your business.

Your monthly payments will be much lower than at 95% LTV. You’ll have real equity in your home. You’ll be in a stronger position when you remortgage in the future.

Additional Costs Beyond the Deposit

The deposit isn’t your only upfront cost. First-time buyers often forget these expenses. They can easily add thousands to your moving costs.

Stamp Duty for First-Time Buyers

First-time buyers pay no stamp duty on properties up to £425,000. For properties between £425,000 and £625,000, you pay 5% on the amount above £425,000.

Example: on a £450,000 property, you pay 5% on £25,000, which equals £1,250.

This relief saves you thousands compared to other buyers.

Legal Fees and Surveys

Budget £1,000 to £2,000 for conveyancing (legal fees). Add £300 to £1,500 for surveys, depending on the type you choose.

Many first-time buyers skip the full structural survey to save money. This can backfire if the property has hidden problems.

Moving Costs and Setup

Factor in removal costs:

• DIY van rental: £300
• Professional movers: £1,500 or more

Then add the smaller costs that accumulate:

• New furniture
• Repairs and decorating
• Appliances if not included
• Household items

Most first-time buyers need an extra £3,000 to £5,000 beyond their deposit and fees just to settle in comfortably.

Building Your Deposit: Practical Saving Strategies

Knowing your target is step one. Reaching it is step two. Here are strategies that work for first-time buyers.

Create a Dedicated Savings Plan

Open a separate savings account for your house deposit only. Make it slightly difficult to access. Don’t add it to your usual banking app. Set up automatic transfers right after payday. You save before you can spend.

Small amounts add up:

• Save £250 per month: reach 5% on a £200,000 property in under three years
• Save £500 per month: reach 10% in just over three years

Maximize Your Lifetime ISA

Max out your Lifetime ISA contributions if you’re eligible. That £1,000 annual government bonus is easy money towards your deposit.

If you’re buying with a partner, you can each have a Lifetime ISA. That’s potentially £2,000 in bonuses per year combined.

Cut Major Expenses

Small daily savings help, but real gains come from cutting big expenses.

Consider these changes:

• Move back with parents for a year
• Take in a lodger
• Switch to a cheaper car or go car-free
• Cancel unused subscriptions
• Reduce eating out

These changes require lifestyle adjustments. But they can speed up your savings timeline by years.

Increase Your Income

Look at side work, freelancing, overtime, or a temporary second job. Every extra pound can go straight into your deposit fund.

Some first-time buyers use windfalls to boost savings:

• Work bonuses
• Tax rebates
• Monetary gifts from family
• Inheritance

When to Buy Your First Home

Having the minimum mortgage deposit doesn’t mean you should buy immediately. Consider these factors first.

Financial Stability

Do you have emergency savings beyond your deposit? Keep three to six months of expenses saved separately. Don’t use every penny for your deposit. You need a buffer when your boiler breaks or if you lose your job.

Employment Security

Lenders want stable employment. They typically look for at least six months to a year in your current role. Self-employed workers need longer employment history.

If you’re in a probation period or considering a career change, wait.

Market Conditions

You can’t time the market perfectly. But being aware of trends helps.

If interest rates are rising rapidly, buying sooner makes sense. If house prices in your area are falling, waiting could mean needing a smaller deposit.

Personal Readiness

Are you ready for the commitment of homeownership? Can you handle maintenance, repairs, and being tied to one location?

Renting longer is fine if you’re not ready. Having a deposit saved doesn’t obligate you to buy.

Getting Mortgage-Ready: Your Final Checklist

Once you’ve saved your minimum mortgage deposit and you’re ready to house hunt, take these final steps.

Check Your Credit Score

Your credit score affects your approval chances and interest rates. Check it several months before applying. Address any issues you find.

Improve your score by:

• Paying bills on time
• Getting on the electoral roll
• Avoiding multiple credit applications close together
• Keeping credit card balances low

Reduce Existing Debts

Lenders assess affordability based on your income minus your commitments. Pay off credit cards, personal loans, and car finance where possible.

Even small debts affect how much you can borrow.

Get a Mortgage Agreement in Principle

An Agreement in Principle (AIP) shows sellers you’re a serious buyer. It gives you provisional approval from a lender.

The AIP involves a soft credit check. It tells you realistically how much you can borrow before you start house hunting.

Speak to a Mortgage Broker

Independent mortgage brokers access deals you won’t find on the high street. They navigate the complex lending landscape to find the best options for your situation.

Many don’t charge first-time buyers directly. They receive commission from lenders instead.

Your Path to Homeownership

The minimum mortgage deposit is 5% of the property value. But this is just the starting point for first-time buyers in the UK property market.

You can technically buy with 5%. But aiming for 10% or 15% unlocks significantly better deals, lower monthly payments, and a smoother buying process.

Your deposit is one piece of the puzzle. Factor in additional costs. Maintain separate emergency savings. Ensure you’re financially and personally ready for homeownership.

Use available schemes like the Lifetime ISA and Mortgage Guarantee Scheme. They maximize your position as a first-time buyer.

Here’s your action plan:

1. Set a realistic target deposit amount (aim for 10% if possible)
2. Open a dedicated savings account and Lifetime ISA
3. Create a monthly savings plan with automatic transfers
4. Cut major expenses and look for ways to increase income
5. Check and improve your credit score
6. Reduce existing debts
7. Get a Mortgage Agreement in Principle
8. Speak to a mortgage broker

The journey takes time and discipline. But with clear goals and understanding of what lenders want, you’ll get there. Your first property might not be your forever home. But it’s your entry point onto the property ladder.

With the right preparation and a sufficient deposit, that first step is achievable.

*Figures correct when post published