When you take out a mortgage, you’ll need to put some money down upfront - known as a deposit. This cash lump sum goes towards the cost of the property you want to buy. The bigger your deposit, the less you'll need to borrow and the lower your monthly repayments will be.
How much deposit you'll need to put down depends on how much the property is worth. A lender will then factor in your deposit when deciding how much you can afford to borrow.
Getting a mortgage can be a stressful experience. It’s especially daunting if you’re worried about being able to save for a deposit. In this Guide, you’ll find all you need to know about mortgage deposits and what your options are if you can’t save a lot of money.
Generally, at least 10% of a property's value is a good deposit for a mortgage. It's possible to buy a home with a 5% using government schemes, but many lenders have put their low deposit deals on hold due to the COVID-19 pandemic.
However, as of April 2021, 5% mortgages will be making a comeback. These mortgages will be available from a number of lenders, and both first time buyers and home-movers will be able to apply.
To put it in perspective, if you bought a house for £250,000, you’d need to put down:
5% deposit: £12,500
10% deposit: £25,000
15% deposit: £37,500
Putting down more money upfront is beneficial for a few reasons. Firstly, it lowers your Loan to Value (LTV) which means you’re asking to borrow less and your monthly repayments will be lower. Secondly, it shows a bigger commitment to a mortgage lender, and can unlock better mortgage deals with lower interest rates.
Having a big deposit doesn't necessarily mean you’ll be able to borrow more money (that depends on your affordability checks) but your monthly payments should be lower because you'll have a smaller loan from the start.
Generally, the average mortgage deposit for a first time buyer in the UK is around 15% of a property’s value. But the mortgage market has changed slightly due to COVID-19. Lenders are being more cautious due to the uncertainty. In some cases, this means they’re asking for higher deposits from first-time buyers.
However, some lenders have come back onto the market with 90% LTV (loan-to-value), meaning you’d only need a 10% deposit. That’s a big positive for any first-time buyer. Lenders like Halifax, Platform, Accord, TSB and Metro Bank are offering these as of December 2020. Read how COVID is affecting mortgages in our Guide: How is the Coronavirus Pandemic Affecting Mortgages?
Some mainstream lenders might ask you to put down a bigger deposit if you have bad credit. However, there are specialist lenders offering bespoke mortgages for people with bad credit scores. These mortgages are underwritten especially for you and your specific situation. Specialist lenders consider people on a case-by-case basis, and are experts in providing tailored mortgages for people with complex financial history.
These specialist lenders aren’t the big banks you see on the high street. And their mortgages aren't usually available directly to you as a borrower, you'd need to go through a specialist mortgage broker.
A specialist mortgage broker can find the right mortgage for you at the best rates, and prepare your application so it looks as good as possible to a lender. If you're worried about bad credit affecting your mortgage deposit, get in touch to get matched with an advisor.
A lot of lenders aren't set up to deal with incomes that don’t follow the typical 9-5. Because your income isn't as straightforward - and sometimes harder to verify - you might be asked to put down a larger deposit as a self-employed person.
Making sure your finances are in order and being able to provide a good deposit will help you to have as many options open to you as possible.
A specialist mortgage broker can find the right mortgage for you at the best rates, and prepare your application so it looks as good as possible to a lender. If you're self-employed and thinking about a mortgage, it's best to work with a mortgage advisor who can find the right lender for you. The brokers we work with are experts at finding mortgages for self-employed people, including freelancers and contractors. Get matched to a broker by making an enquiry.
When buying a second home, you might be asked to pay a bigger deposit - usually at least 25%. You may also be asked to pay a higher interest rate. Second home mortgages work the same way as regular mortgages, but with much stricter lending criteria, as you’ll need to prove you can afford two mortgages.
You'll likely have to put down a minimum deposit of 25% on a Buy to Let mortgage. As with other mortgages, putting down a bigger deposit unlocks the better interest rates. Read how Buy to Let mortgages are different from other mortgages.
Probably not. Mortgages without a deposit - referred to as 100% mortgages - are not common at all. Some specialist lenders may occasionally offer them. But at the moment, there are no 100% mortgages on the market.
You’d probably need to have a perfect credit history to be considered if they ever do come back on the market. And they’re likely to only come onto the market in times of very strong national financial stability.
If you don’t have a deposit and need a mortgage, you could consider a guarantor mortgage. Which means someone else agrees to legally pay your mortgage if you're no longer able. This is a serious commitment, as your guarantor's home will be secured against a part of your mortgage.
This means they’ll have to pay any outstanding costs if your house is repossessed and sold by the bank. Lenders see 100% mortgages as a risky investment, and if you're a first time buyer then you probably won't be approved. If you do manage to find a deposit-free mortgage, you'll usually have to pay much higher interest rates than a mortgage with a deposit.
Not really. When buying a home, you can back out from the process at any time. However, after you’ve exchanged contracts then you’ll lose your deposit if you don’t go ahead.
Once the purchase has gone through, you won’t get your deposit back. It’s a down payment that goes towards your ownership of the property - it’s a big commitment. However, if later on you decide to release some equity from your home (and your house hasn’t decreased in value), or you sell it at a profit, then you can get some or all of that money back to put towards something else.
When it comes to remortgaging, you won’t need to save for another deposit. You can use the equity you already have in your home as a deposit.
Equity is the cash difference between how much your home is worth, and how much you have left to pay on your mortgage. Let's say you sold your house for £500,000 with £300,000 still left to pay on your mortgage. Your equity would be £200,000. You won't have equity from an interest-only mortgage unless your house has gone up in value.
See how much you could borrow with our Remortgage Calculator.
When buying your next home, you'll need a new mortgage. You can move your existing mortgage over to the new property (called 'porting'). If the new property is more expensive than your current home, you'll need to reapply to borrow more money.
If you have equity in your current home, you can use this as a deposit for the next property. When moving house, it's a good idea to talk to a mortgage advisor. They'll be able to talk you through your options clearly, and can find the right lender for you at the best rate. Make an enquiry to get matched to a broker.
If you can’t save up for a big deposit, there are some options available to get you on the property ladder:
Help to Buy
Help to Buy is a government scheme for first time buyers. It enables you to get on the property ladder with a 5% deposit. The government gives you an equity loan to put towards the cost of a new build home. The loan ranges from 5-20% of the property value (40% in London), and you'll need to purchase your home from a registered Help to Buy homebuilder. Read more about Help to Buy.
Shared Ownership means you buy part of a property and rent the rest. You take out a mortgage on the bit you're buying, then pay a reduced rent on the bit you don't own. You’re able to buy between 25-75%, and can buy some or all of the remaining share when you can afford to. Read more about Shared Ownership.
Right to Buy
Right to Buy was set up in the 1980s, and gives you the opportunity to buy your council home for a discounted price. Most lenders will accept your discount in place of a deposit, but it's only available in England. Read more about Right to Buy.
Over 50% of mortgages for people who are self-employed or have bad credit aren’t available directly to you. They’re only available through specialist brokers. Using our platform guarantees you’ll be matched with a broker who has a proven track record of making mortgages possible for people like you. Less processing, more understanding.
Applying for a mortgage or understanding your options shouldn't be confusing, yet there are just so many myths doing the rounds and it's not easy to know where to turn to get the right advice.
Our calculators give you an idea of what you might be able to borrow, what's affordable and a rough estimate of the kind of property prices you can start to look at.