What Deposit Do I Actually Need as a First-Time Buyer?
“How much deposit do I actually need as a first-time buyer?” is one of the first questions we hear from people hoping to get onto the property ladder. And if you’ve been told you need a huge pot of savings before you can even think about buying, the reality may be more encouraging.
How much deposit do I need as a first-time buyer? As a first-time buyer, you will usually need a deposit of at least 5% to 10% of the property price. A 5% deposit can be enough for some mortgages, but putting down more can give you access to a wider choice of products and potentially reduce the amount you need to borrow. The right figure depends on the property, your income, affordability and the lender’s criteria.
What does a 5% first-time buyer deposit look like?
The easiest way to understand it is to put some numbers against it. If the home you want to buy costs £250,000, a 5% deposit would be £12,500. A 10% deposit would be £25,000.
The remaining amount would normally be covered by your mortgage, subject to the lender agreeing that the borrowing is affordable for you.
This is where you might hear the term loan to value, or LTV. It simply describes the size of your mortgage compared with the property’s value. Put down a 5% deposit and, broadly speaking, you are looking for a 95% LTV mortgage.
There are mortgages designed for buyers with smaller deposits. The Government’s permanent Mortgage Guarantee Scheme also supports participating lenders offering eligible buyers mortgages at 90% to 95% LTV. However, availability and lender criteria vary, and having the minimum deposit does not automatically mean you will qualify for the mortgage you need.
Is a bigger first-time buyer deposit better?
It can be, but that does not necessarily mean you should put every penny you have into the deposit.
A larger deposit means you need to borrow a smaller proportion of the property’s value. That can open up a wider range of mortgage products and may result in more competitive borrowing options.
For example, someone with a 10% deposit may have different options available from someone with 5%. Increasing the deposit further can change those options again.
But there is another side to this. Buying a home involves more than the deposit, so using every bit of your savings to reach the next LTV bracket may leave you short of cash when you actually move in.
That is why it is worth looking at the whole picture rather than automatically assuming “bigger deposit equals better”.
Don’t forget the costs on top of your deposit
This catches plenty of first-time buyers out. Your deposit is not necessarily the total amount of cash you will need to complete your purchase.
Depending on your circumstances and the property, other costs could include:
- solicitor or conveyancing costs
- property searches
- a survey
- mortgage-related fees
- buildings insurance
- moving costs
- furniture, decorating and those inevitable first trips to the DIY shop
- Stamp Duty Land Tax, if applicable to your purchase
The exact costs vary, which is why keeping some money aside rather than putting everything into your deposit can make sense.
Could I buy with no deposit at all?
There are some 100% mortgages, where you borrow the full value of the property. These are much less widely available than mortgages requiring a deposit and can come with particular eligibility requirements and risks.
One of those risks is negative equity. This means owing more on your mortgage than your home is worth if property prices fall. With no deposit providing a cushion, that risk can be greater.
So while a no-deposit mortgage may be worth exploring for some buyers, it should not be viewed as an automatic shortcut onto the property ladder. Getting advice specific to your circumstances is important.
How do I work out the deposit I personally need?
Rather than picking a savings target at random, start with the price range of properties you would realistically consider buying. From there, you can calculate what 5%, 10% and perhaps 15% deposits would look like.
Then comes the important bit: finding out how much you may actually be able to borrow.
Lenders consider factors including your income, regular commitments, credit history and overall affordability. So having enough for a 5% deposit on a particular property does not necessarily mean a lender will agree to provide the remaining 95%.
This is where speaking to a mortgage adviser before spending months chasing an arbitrary savings figure can help. At Wolsey Mortgage, we can look across more than 12,000 products from over 80 lenders and help you understand what may be realistic for your circumstances.
You may discover you are closer to buying than you thought. Equally, it may make sense to save for longer, reduce other commitments or aim for a different property budget. Knowing that sooner gives you something useful to work towards.
Frequently Asked Questions
Can a first-time buyer get a mortgage with a 5% deposit?
Yes, mortgages requiring a 5% deposit are available, subject to lender criteria and affordability. The products available to you will depend on your individual circumstances and the property you want to buy.
Is it worth saving a 10% deposit instead of 5%?
Potentially. A larger deposit reduces your loan to value and can give you access to different mortgage products, but waiting to save more is not automatically the best option for everyone. It is worth comparing what is available at different deposit levels.
Do I need money on top of my mortgage deposit?
Usually, yes. You should budget for costs such as legal work, surveys, moving expenses and any applicable taxes or mortgage fees, rather than assuming your deposit is the only cash you will need.
Can my family help with my first-time buyer deposit?
Many lenders accept gifted deposits from family members, although their rules and the evidence they require vary. Your adviser can check which lenders may accept the arrangement you have in mind.
Should I wait until I have a bigger deposit?
Not necessarily. Saving more may improve your mortgage options, but whether waiting makes sense depends on your finances, affordability, property plans and the products available to you now.
Find out what your deposit could get you
You don’t need to have everything figured out before speaking to us. If you’re saving for your first home and want to know whether your current deposit could be enough, book a free chat with Wolsey Mortgage. Our advisers can talk through your options in plain English, with appointments at a time and place to suit you.
Mortgage rates, products and lending criteria vary. Your home may be repossessed if you do not keep up repayments on your mortgage. Get in touch with Wolsey Mortgage for advice specific to your situation.