Last reviewed: June 2026
TL;DR- A minimum 5% deposit (95% LTV) is the lowest available on mainstream products, though larger deposits unlock significantly better rates.
- Each LTV tier (95%, 90%, 85%, 80%, 75%, 60%) typically carries a lower interest rate - the difference in total interest cost between a 5% and 10% deposit can be substantial.
- Government schemes (Lifetime ISA, shared ownership, First Homes) can supplement savings toward a deposit.
- In addition to the deposit, buyers need funds for stamp duty, legal fees and survey costs - typically £5,000-£15,000 on a standard purchase.
How Much Deposit Is Needed?
The minimum deposit for a standard residential mortgage in the UK is 5% of the purchase price (95% LTV). Specific schemes (family springboard, some track-record products) allow lower deposits where family savings or other security substitute, but 5% is the practical minimum for most borrowers. Higher deposits improve the LTV tier and access significantly better rates and more lender options.
A useful guide to deposit targets:
- 5% (95% LTV): minimum available; highest rates; limited lender choice.
- 10% (90% LTV): meaningful rate improvement over 95%; wider lender choice.
- 15% (85% LTV): further rate improvement; most mainstream lenders accessible.
- 25% (75% LTV): standard BTL requirement; competitive residential rates.
- 40% (60% LTV): typically the best rate tier; lowest rates available.
The Rate Benefit of a Larger Deposit
The interest rate improvement from a larger deposit can be substantial over the life of a mortgage. On a £200,000 mortgage at 90% LTV versus 85% LTV, a 0.3% rate difference saves approximately £600 per year. Over a 25-year term, this compounds to a meaningful total saving. The break-even point for saving an additional deposit amount (delaying purchase) versus purchasing sooner at the lower deposit depends on the rate differential, rental costs during the saving period and expected property price movements - all of which should be modelled for specific circumstances.
Government Schemes That Help With Deposits
Several government schemes assist with deposit accumulation or reduce the deposit needed:
- Lifetime ISA: 25% government bonus on savings up to £4,000 per year - usable on properties up to £450,000 for first time buyers.
- Shared ownership: reduces the deposit needed by purchasing only a share of the property (deposit is 5-10% of the share price, not the full market value).
- First Homes: minimum 30% discount on new build properties, reducing the purchase price and therefore the deposit required.
- Right to Buy: the discount can be used as the deposit by eligible council tenants.
Costs Beyond the Deposit
The deposit is not the only upfront cost of purchasing a property. Buyers also need to fund: stamp duty land tax (up to several thousand pounds on most purchases; first time buyers have relief up to £500,000 in England); legal fees (£1,500-£3,000 for a standard conveyance); mortgage arrangement fee (£0-£2,000); survey (£400-£1,500 depending on survey type); and removal costs and any immediate works on the new property. Total upfront costs beyond the deposit are typically £5,000-£15,000 on a standard first purchase. Buyers should ensure they have these funds in addition to their deposit.
Frequently Asked Questions
Can I use a gifted deposit from family?
Yes. Most mortgage lenders accept gifted deposits from close family members, subject to a signed gifted deposit letter confirming the funds are a gift and not a loan, and anti-money laundering documentation. The lender must be informed of the source of all deposit funds.
Does the deposit need to be in cash savings?
The deposit must be in cash (or cash equivalent) at the point of exchange of contracts. It can come from savings, a LISA, a Help to Buy ISA bonus, a gifted deposit, proceeds from a previous property sale, or other liquid sources. Lenders will verify the source of funds as part of the mortgage application and AML process. The deposit cannot be funded from another loan (such as a personal loan) without this being disclosed and factored into the affordability assessment.
How long does it take to save a deposit?
This depends entirely on income, expenditure, house prices in the target area and government scheme usage. Using a Lifetime ISA (£4,000 per year saving = £5,000 with the bonus), a consistent savings discipline and potentially a gifted deposit from family, first time buyers can build deposits faster than without these tools. A realistic savings plan calibrated to the target property price and deposit percentage is the starting point for any first time buyer.
Is a larger deposit always better?
A larger deposit improves LTV, reduces the mortgage and saves interest. However, there are circumstances where retaining some savings rather than maximising the deposit is sensible: an emergency fund should be maintained; purchase costs must be met; and if interest rates are very low, retaining savings in investments that earn more than the mortgage rate is more efficient. The optimal deposit level depends on individual circumstances, savings rates versus mortgage rates, and liquidity needs.
