How Much Deposit Do First-Time Buyers Need in the UK?

This is one of the questions we’re most frequently asked. Generally, first-time buyers will require a deposit of 5% – 15% of the property value. This is money you will pay as lump sum at the outset.

The size of your deposit affects the mortgages available to you from different lenders, the interest rates and cost of monthly repayments. This is because the size of your deposit alters the loan-to-value (LTV) ratio.

The LTV ratio is the value of the loan compared to the property value, shown as a percentage.

If you take out a £255000 mortgage to buy a £300,000 home, the LTV is 85% – as you’ll need to borrow 85% of the home’s value in order to buy the property.

In short, the more you can put down as a deposit the more options you’ll have available to you.

We know it’s hard to save for a deposit, especially if you’re renting your existing home. However, there are a number of things you could do to make this easier, including:

• Opening a Lifetime ISA and benefiting from a 25% government bonus on your savings
• Set a savings goal and budget for saving each month
• Take in a flat mate, or find other ways to reduce your existing housing costs
• See if you’re eligible for any affordable housing schemes
• Ask family to help!

When arranging your mortgage you will be asked for proof of deposit. Depending on the source of funds being used for the deposit will determine whether bank statements are required, a gifted letter or an investment statement. Your broker will ask you for this information as and when required.

Making Deposits More Affordable

First Homes Scheme

The First Homes Scheme helps first-time buyers purchase new-build homes at a discount of at least 30% to 50% off market value. The discount remains with the property for future buyers. It’s aimed at local buyers and key workers, making home ownership more affordable with smaller deposits and mortgages. Find out more here.

Lifetime ISA (LISA)

A Lifetime ISA helps first-time buyers save for a home with a 25% government bonus on contributions of up to £4,000 per year. The savings can be used towards a first home costing up to £450,000, provided the account has been open for at least 12 months. More about Lifetime ISAs here.

More about First-Time Buyer Mortgages

Find out more about buying your first home by exploring our other helpful articles on this topic:

• What Is a First-Time Buyer? UK Definition, Benefits & Eligibility
• How Much Can a First-Time Buyer Borrow in the UK?
• First-Time Buyer Mortgage Types & UK Government Schemes Explained
• The Full First-Time Buyer Mortgage Process: Step by Step
• First-Time Buyer Costs, Mistakes to Avoid & Why Use an Independent Broker