Saving for a mortgage deposit is one of the biggest financial challenges most people face. But how much do you actually need? The answer depends on several factors, including the type of mortgage, the property price, and the deals available to you. This guide breaks down everything you need to know about mortgage deposits.
The Minimum Deposit
The absolute minimum deposit for most mortgages in the UK is 5% of the property price. This means for a property worth £150,000, you would need at least £7,500.
While 5% deposits are available, they come with trade-offs. You will have fewer lenders to choose from, higher interest rates, and will need to pass stricter affordability checks. That said, a 5% deposit mortgage is a perfectly valid route onto the property ladder, and thousands of buyers use them every year.
How Your Deposit Size Affects Your Mortgage
Your deposit directly determines your loan-to-value (LTV) ratio, which is the percentage of the property price that you are borrowing. A larger deposit means a lower LTV, which generally means better mortgage deals.
Deposit Tiers and What They Unlock
5% Deposit (95% LTV)
The minimum for most lenders. You will have access to a limited range of products, and interest rates will be at the higher end. Some lenders require a minimum 5% deposit to come from your own savings rather than a gift, though policies vary.
10% Deposit (90% LTV)
A significant step up from 5%. At 90% LTV, you unlock noticeably better interest rates and a wider choice of lenders. The difference in monthly payments between a 95% and 90% LTV mortgage can be substantial. If you can stretch to 10%, it is usually worth the effort.
15% Deposit (85% LTV)
Another meaningful threshold. Rates improve again at 85% LTV, and you will find even more competitive products available. Some specialist mortgage types, such as certain buy-to-let mortgages, require a minimum of 15%.
20-25% Deposit (75-80% LTV)
At this level, you are accessing some of the best rates on the market. The difference between 75% and 60% LTV is smaller than the jump from 95% to 90%, so the returns on saving more start to diminish here.
40%+ Deposit (60% LTV)
The very best rates are typically available at 60% LTV. Beyond this point, there is little additional benefit in terms of interest rates, though a larger deposit means smaller monthly payments and less total interest paid.
What This Means in Practice
On a £200,000 property, here is what different deposit levels look like:
- 5% deposit: £10,000 deposit, £190,000 mortgage
- 10% deposit: £20,000 deposit, £180,000 mortgage
- 15% deposit: £30,000 deposit, £170,000 mortgage
- 20% deposit: £40,000 deposit, £160,000 mortgage
The interest rate difference between 95% and 90% LTV could easily be 0.5% or more. On a £180,000 mortgage over 25 years, that 0.5% difference could save you over £15,000 in total interest. It is a powerful incentive to save a little more if you can.
Deposit Requirements by Mortgage Type
First-Time Buyer Mortgages
Minimum 5% deposit from most mainstream lenders. Some lenders offer specific first-time buyer products with competitive rates at higher LTVs. Government schemes like Shared Ownership can reduce the deposit needed, as you only need a deposit on the share you are buying.
Remortgages
When remortgaging, your "deposit" is the equity you already hold in the property. If your property has increased in value since you bought it, your LTV may have improved naturally, giving you access to better rates.
Buy-to-Let Mortgages
Most buy-to-let lenders require a minimum 25% deposit (75% LTV). Some specialist lenders may accept 20%, but products are limited. This is a key difference from residential mortgages and means buy-to-let investment requires more upfront capital.
Bad Credit Mortgages
If you have adverse credit history, lenders typically require a larger deposit to offset the perceived risk. Depending on the severity of the credit issues, you may need 15-25% or more. The larger your deposit, the more options become available.
Where Can Your Deposit Come From?
Personal Savings
The most straightforward source. Lenders like to see that you have saved the deposit yourself, as it demonstrates financial discipline. Most lenders will want to see evidence of where the money has come from, typically through three to six months of bank statements.
Gifted Deposits
Many first-time buyers receive help from family members. A gifted deposit from a parent or close family member is acceptable to most lenders, provided:
- The person gifting the money provides a signed letter confirming it is a gift, not a loan
- They confirm they have no interest in the property
- They can evidence the source of the funds (anti-money laundering requirements)
Some lenders require that a portion of the deposit comes from your own savings, even if the majority is gifted. Your broker can advise on which lenders are most flexible.
Inheritance
Inherited money can be used as a deposit. You will need to provide documentation such as a grant of probate and solicitor correspondence to evidence where the funds came from.
Equity from an Existing Property
If you are selling a property to buy another, the equity from the sale forms your deposit. This is common for home movers and second-time buyers.
Sources That Are Not Acceptable
Lenders will not accept deposits funded by:
- Unsecured loans: Taking out a personal loan for your deposit is not permitted
- Credit cards: Withdrawing cash from a credit card for your deposit is not accepted
- Gambling winnings: Difficult to evidence and many lenders will not accept this
- Unverifiable sources: Any money that cannot be clearly traced to a legitimate source
Tips for Saving Your Deposit
Use a Lifetime ISA
If you are a first-time buyer under 40, a Lifetime ISA lets you save up to £4,000 per year and receive a 25% government bonus (up to £1,000 per year). Over several years, this bonus adds up significantly. The property must be worth £450,000 or less, which covers the vast majority of properties in Northern Ireland.
Set Up a Standing Order
Automate your savings by setting up a standing order to a dedicated savings account on payday. Treating your deposit savings like a bill, something that goes out before you spend on other things, is one of the most effective ways to build a deposit.
Review Your Spending
Look at your bank statements and identify areas where you could cut back. Subscriptions you no longer use, eating out, and impulse purchases are common areas where savings can be found. Even small changes can add up over the months.
Consider Your Timeline
Be realistic about how long it will take to save your target deposit. If you can save £500 per month, it would take roughly two and a half years to save a 10% deposit on a £150,000 property. Knowing your timeline helps you plan and stay motivated.
Is It Worth Waiting to Save More?
This is a common dilemma. Saving a larger deposit gets you better rates, but property prices may rise while you are saving, potentially offsetting the benefit. There is no one-size-fits-all answer, but generally:
- If you can reach the next LTV threshold (e.g. from 95% to 90%) within a few months, it is usually worth waiting
- If it would take years to reach the next tier, it may be better to buy sooner and build equity through repayments and property growth
- Your personal circumstances matter too, including job stability, rental costs, and life plans
Need Help Working Out Your Options?
At CGR Financial, we help buyers across Northern Ireland understand their deposit options and find the right mortgage for their budget. Whether you have 5% saved or 25%, we will search the whole market to find the best deal for your circumstances.
Contact us for a no-obligation consultation. We can show you exactly what is available at your deposit level and help you plan your next steps.