Understanding Mortgage Deposits
A mortgage deposit is the upfront cash payment you make when buying a property. It represents your initial equity stake in the home and reduces the amount you need to borrow. The deposit is typically expressed as a percentage of the property's purchase price.
Your deposit amount directly affects your mortgage terms, interest rates, and monthly payments. Generally, larger deposits secure better mortgage deals and lower monthly costs.
2025 UK Average
The average first-time buyer deposit in the UK is currently £62,470, representing about 18% of the property value. However, mortgages are available from as little as 5% deposit with the right circumstances.
How Much Deposit Do You Need?
Minimum Deposit Requirements
5% Deposit
Minimum for most first-time buyers. Limited lender options, higher interest rates, and require mortgage guarantee schemes.
10% Deposit
Better choice of lenders and slightly improved rates. Still considered high LTV (Loan-to-Value) by most lenders.
15% Deposit
Good balance of accessibility and competitive rates. Wide range of mortgage products available.
20%+ Deposit
Access to best rates and terms. No mortgage guarantee schemes required. Lower monthly payments.
Impact of Deposit Size
| Deposit % | LTV | Typical Rate Range | Lender Options |
|---|---|---|---|
| 5% | 95% | 5.5% - 6.5% | Limited |
| 10% | 90% | 4.8% - 5.8% | Moderate |
| 15% | 85% | 4.3% - 5.3% | Good |
| 20% | 80% | 3.9% - 4.9% | Excellent |
Sources of Deposit Funds
Personal Savings
The most straightforward source. Building a deposit through regular savings shows financial discipline to lenders and doesn't require repayment.
Family Gifts
Gifted deposits from family members are widely accepted by UK lenders. Requirements include:
- Signed gifted deposit letter confirming no repayment expected
- Source of funds documentation from the gift giver
- Bank statements showing the transfer
- Proof of relationship to the borrower
Government Schemes
Lifetime ISA (LISA)
Save up to £4,000 annually and receive a 25% government bonus (up to £1,000 per year). Available for first-time buyers purchasing properties up to £450,000.
Help to Buy ISA (Closed to New Savers)
Existing savers can still claim bonuses. Provides 25% bonus on savings up to £3,000 maximum bonus.
Alternative Sources
- Inheritance: Money left by deceased relatives
- Asset Sales: Proceeds from selling investments, vehicles, or other property
- Pension Release: Early pension access (with significant restrictions)
- Side Income: Freelance work, business profits, or second jobs
Proven Deposit Saving Strategies
The 50/30/20 Rule
Allocate your after-tax income as follows:
- 50%: Essential expenses (rent, utilities, groceries)
- 30%: Discretionary spending (entertainment, dining out)
- 20%: Savings and debt repayment (including deposit savings)
Automated Saving
Set up automatic transfers on payday to a dedicated deposit savings account. This "pay yourself first" approach ensures consistent progress toward your goal.
High-Interest Savings Accounts
Regular Saver Accounts
Higher interest rates (up to 7%+) for monthly deposits. Perfect for building deposits systematically.
Fixed-Rate Bonds
Guaranteed returns for money you won't need for 1-5 years. Rates currently around 4-5%.
Cash ISAs
Tax-free savings up to £20,000 annually. Combine with LISA for maximum benefit.
Premium Bonds
Risk-free option with potential tax-free prizes. Good for large deposit sums you're protecting.
Reducing Living Costs
Housing Costs
- Move back with family: Potentially save £800-£1,500+ monthly
- Downsize rental property: Reduce rent while saving
- House share: Split costs with others
- Move to cheaper area: Lower rent, save for deposit in target area
Transport Savings
- Use public transport instead of car ownership
- Cycle or walk for short journeys
- Work from home more frequently
- Consider car sharing schemes
Lifestyle Adjustments
- Cook at home instead of takeaways and restaurants
- Cancel unused subscriptions and memberships
- Shop smart with price comparison and vouchers
- Find free entertainment alternatives
Calculate Your Deposit Requirements
Use our mortgage calculators to see how different deposit amounts affect your monthly payments and mortgage terms.
Explore CalculatorsTimeline and Planning
Setting Realistic Targets
Calculate how long it will take to save your target deposit:
Example Calculation
Target property price: £300,000
Desired deposit (15%): £45,000
Current savings: £5,000
Monthly saving capacity: £1,500
Time needed: (£45,000 - £5,000) ÷ £1,500 = 27 months
Milestones and Reviews
- Quarterly reviews: Check progress and adjust if needed
- Annual rate shopping: Move savings to better accounts
- Expense audits: Identify new saving opportunities
- Income optimization: Seek raises or additional income
Final Steps Before Purchase
- 3 months before: Move deposit to instant access account
- 6 weeks before: Obtain mortgage Agreement in Principle
- During purchase: Keep proof of deposit source ready for lender