How Much Deposit Do You Need for a House

Buying a house in the UK involves many important financial decisions, and one of the first is understanding how much deposit you need. A deposit is the amount of money you contribute upfront towards the purchase price of a property. It forms the foundation of your mortgage agreement and can significantly influence the deals available to you.

The size of your deposit affects not only your borrowing power but also your interest rates, lender choice and overall affordability. Whether you are a first-time buyer or moving home, knowing the typical deposit requirements can help you plan more effectively and put you in a stronger position when applying for a mortgage.

What Is a House Deposit

A deposit is the lump sum you pay towards the cost of the property at the start of the purchase process. It is usually expressed as a percentage of the property's value. For example, if you are buying a house for £250,000 and have a 10 percent deposit, you will need to contribute £25,000 yourself and borrow the remaining £225,000 through a mortgage.

The larger the deposit you can offer, the lower your loan-to-value ratio. This ratio is the proportion of the property price being financed by the mortgage. Lower ratios generally result in better interest rates and broader lender options.

What Is the Minimum Deposit Required

In the UK, the minimum deposit required to buy a property is typically 5 percent of the purchase price. This means if you are buying a house for £200,000, you will need at least £10,000 as a deposit. Mortgages requiring a 5 percent deposit are known as 95 percent loan-to-value mortgages.

Some lenders do offer mortgages with lower deposits under government-backed initiatives, but these are often limited to certain buyer groups or new-build properties. Most people find that saving between 10 and 20 percent gives them access to more competitive rates and greater borrowing flexibility.

How Much Do People Typically Save

Although 5 percent is the minimum deposit accepted by many lenders, the average first-time buyer in the UK typically puts down around 15 to 25 percent. This varies depending on region, house prices and individual circumstances. In areas with higher property values, such as London and the South East, deposits tend to be larger, both in percentage and actual amount.

A buyer purchasing a home for £300,000 with a 15 percent deposit would need £45,000 upfront. Buyers who can contribute 20 percent or more are often rewarded with significantly better mortgage terms.

Why a Bigger Deposit Helps

A larger deposit not only reduces the amount you need to borrow but also lowers your monthly repayments. Lenders view borrowers with bigger deposits as lower risk, which can lead to more favourable mortgage rates. A lower interest rate can save you thousands over the life of the loan.

Additionally, some lenders only offer certain products to borrowers with lower loan-to-value ratios. This means that having a 15 or 20 percent deposit may give you access to exclusive deals that are not available to those with only a 5 percent deposit.

Deposit Schemes for First-Time Buyers

If saving a deposit is proving difficult, there are government schemes available to help. Shared ownership schemes allow you to buy a portion of a home and pay rent on the remainder, reducing the size of deposit needed. Mortgage guarantee schemes can also make it easier for buyers to access 95 percent mortgages by reducing the lender’s risk.

Other options include Lifetime ISAs, which provide a government bonus on your savings when used to buy your first home. First-time buyers should explore these alternatives to find the best fit for their financial situation.

Affordability Checks and Eligibility

Even if you have saved a suitable deposit, lenders will still assess your ability to repay the mortgage through detailed affordability checks. These include evaluating your income, regular outgoings, credit score and any existing financial commitments. Most lenders allow borrowing up to four or five times your annual income, depending on the overall risk profile.

Being realistic about your borrowing limits will help you avoid overstretching your finances and improve your chances of mortgage approval.

When and How to Pay Your Deposit

The deposit is paid via your solicitor or conveyancer at the point of exchange of contracts. This is when the sale becomes legally binding, and your deposit is held until completion. If you are buying a property with a mortgage, the deposit must be fully in place before exchange to avoid delays.

It is important to ensure your deposit funds are in a readily accessible account and can be transferred promptly when needed.

Case Example

A couple buying their first home in the North West saved for a 10 percent deposit on a £220,000 house, putting down £22,000. This allowed them to secure a 90 percent loan-to-value mortgage with a competitive fixed rate over five years. Had they opted for only a 5 percent deposit, their mortgage rate would have been higher, costing them several thousand pounds more in interest payments over the same period.

Conclusion

The minimum deposit required to buy a house in the UK is 5 percent of the property’s value, but a larger deposit can offer significant benefits. Most buyers aim for at least 10 to 15 percent, which opens the door to better mortgage rates, lower monthly payments and more borrowing options. Understanding how much you need and exploring available schemes can make the home buying process more achievable. With careful planning and sound advice, saving for a deposit is a realistic and worthwhile goal that forms the foundation of successful home ownership.