You're saving hard in preparation for buying your first home, but how much do you actually need?
By the end of this chapter you’ll understand:
✓ What a deposit is
✓ How much you might need
✓ Different ways to save a deposit
✓ What A gifted deposit is
✓ Why are larger deposit can sometimes make a difference
Estimated Reading Time: 9 minutes
Let’s start with the basics
One of the biggest questions first-time buyers ask is:
“How much deposit do I actually need?”
It’s a great question, and one that’s often surrounded by myths. Some people think you need tens of thousands of pounds before you can even think about buying a home. Others believe you need a 20% deposit.
The reality is that every buyer’s circumstances are different, and the amount you’ll need depends on several factors, including the property you’re buying, the type of mortgage available and your own financial situation.
Before looking at figures, it’s helpful to understand exactly what a deposit is.
What is a deposit?
Your deposit is the amount of money you contribute towards buying your home.
The rest of the purchase price is usually covered by your mortgage.
Here’s a simple example.
If you’re buying a property for £250,000 and have saved £25,000, your deposit represents 10% of the purchase price.
You would then need a mortgage for the remaining £225,000.
This is often referred to as your Loan to Value (LTV). We’ll explain LTV in more detail later in this guide, but for now, think of it as the percentage of the property’s value that you’re borrowing.
Did You Know?
The size of your deposit doesn’t just affect how much you borrow. It can also influence the range of mortgages available to you and the interest rates on offer. Every lender has its own criteria, so it’s worth speaking to us to understand the options available based on your circumstances.
There’s no one-size-fits-all answer. Some buyers purchase with a relatively small deposit, while others choose to save more before buying. As a general guide, many buyers work off percentages of the purchase and aim for either 5%, 10%, 15% or 20% of the purchase price. The amount that’s right for you will depend on your personal circumstances and the mortgage options available at the time.
Ways to build your deposit
Saving for a deposit takes time, and everyone’s journey is different. Some buyers save gradually over several years, while others receive support from family.
Common ways people build a deposit include:
The important thing is being able to show where your deposit has come from, as your lender and solicitor will usually need evidence during the purchase process.
What is a gifted deposit?
A gifted deposit is money given to you, usually by a close family member, to help you buy your home. Unlike a loan, the money is genuinely gifted and isn’t expected to be repaid. If you’re using a gifted deposit, your solicitor will usually ask the person providing the money to sign a declaration confirming that it’s a gift and not a loan. Your mortgage adviser will explain if any additional information is needed.
This is a question many first-time buyers ask.
Saving a larger deposit may provide access to a wider range of mortgage options, but waiting longer isn’t always the right answer for everyone.
While you’re saving, house prices and mortgage rates can change, and everyone’s circumstances are different.
Rather than aiming for an arbitrary figure, it’s often more helpful to understand what’s achievable based on your current situation.
A conversation with a mortgage adviser can help you understand your options today, even if you’re not planning to buy immediately.
Gifted deposits are becoming increasingly common, especially for first-time buyers.
If you’re receiving help from family, it’s worth mentioning this to your mortgage adviser as early as possible so they can explain how the process works and what documentation may be required.
Alex and Sophie originally believed they needed a 20% deposit before they could buy.
After speaking to us, they discovered they may have options with a smaller deposit than they expected.
Rather than delaying their plans for several more years, they were able to begin looking at homes that suited both their budget and their circumstances.
Sometimes, understanding your options is just as valuable as saving more money.
✓ What a deposit is and why it’s important.
✓ How deposits are usually calculated.
✓ The different ways people save for a deposit.
✓ How gifted deposits work.
✓ Speaking to us can help you understand your options sooner than you might expect.
Next Chapter
How Does a Mortgage Actually Work?
Now that you understand deposits, it’s time to look at the other part of buying a home, the mortgage itself.
