How Much Deposit Do I Need for a Mortgage?

Deposit levels and what they unlock

Deposit is expressed as loan to value. A 10 per cent deposit means a 90 per cent loan to value mortgage.

• 5 per cent: possible for residential purchases with a clean profile, fewest lenders, highest rates, and little tolerance for anything unusual in the case
• 10 per cent: the point at which most mainstream lenders become available and pricing improves noticeably
• 15 per cent: usually enough for self-employed applicants with one year of accounts or for lighter adverse credit cases
• 20 to 25 per cent: keener rates, and the normal starting point for buy-to-let
• 40 per cent or more: typically the best rates any lender publishes

Where the deposit can come from

Lenders care about source as much as amount, because of anti-money-laundering rules. Savings built up over time are simplest. Other sources are usually acceptable with the right paperwork.

• A gift from a close family member, evidenced by a signed gifted deposit letter confirming it is non-repayable with no interest in the property
• Equity released from selling another property
• An inheritance, with probate or solicitor confirmation
• A Lifetime ISA, including the government bonus
• Sale of shares or other assets, with a clear audit trail into your account
• Builder incentives or vendor gifted deposits, accepted by fewer lenders and usually capped at 5 per cent

The costs beyond the deposit

Budget for these separately. Running your deposit down to the last pound to hit a loan to value band is a common and avoidable mistake.

• Stamp duty, depending on price, first-time buyer status and whether it is an additional property
• Legal and conveyancing fees, plus searches
• Survey or valuation, where not free with the product
• Lender arrangement fee, which can often be added to the loan
• Broker fee: our standard fee is 499, payable on offer rather than upfront
• Moving costs and any immediate works

Is it worth waiting to save more?

If you are close to a loan to value threshold, saving a little more can pay for itself many times over through a lower rate across the fixed period. If you are far from the next band and rents are rising, waiting may cost more than it saves. We will run both numbers with you rather than give a general answer.