How Much Deposit Do I Need?

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For most first-time buyers, understanding how much deposit is required is one of the biggest hurdles to getting onto the property ladder. Deposit size affects not only whether a mortgage is available to you, but also which lenders you can use, how competitive your interest rate will be, and how much your monthly repayments are likely to be.

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This guide explains how mortgage deposits work for first-time buyers, how lenders assess your application, and what options may be available if your deposit is small or still growing.

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What Is a Deposit and Why Is It Required?

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A deposit is a sum of money you contribute towards the purchase of a property. It is paid upfront and combined with a mortgage to make up the full purchase price of the home.

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In simple terms:

Deposit + Mortgage = Property Purchase Price

For example, if you are buying a property for £200,000 and you have saved a £20,000 deposit, you would require a mortgage of £180,000.

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Mortgage lenders require a deposit because it reduces their risk. The more money you invest upfront, the lower the lender’s exposure if property prices fall or if the mortgage were to default.

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Minimum Deposit for First-Time Buyers

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Most lenders require first-time buyers to provide a minimum deposit of 5% of the property value. However, this is not a guarantee of acceptance. Many first-time buyers are declined by lenders due to deposit size, particularly where affordability or credit history is borderline.

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While 95% loan-to-value mortgages do exist, lenders can impose:

• Stricter affordability assessments

• Higher credit scoring thresholds

• Limited property type acceptance

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Some lenders may require a 10%, 15%, or even 20% deposit depending on your personal circumstances, employment type, or credit profile.

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Does a Larger Deposit Improve My Mortgage Options?

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Generally speaking, the larger your deposit, the easier it is to secure a mortgage and the better the interest rate you are likely to receive.

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First-time buyers often struggle to save a large deposit and may rely on:

• Gifts from parents or family members

• Long-term savings plans

• Bonuses or secondary income

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Gifted deposits are widely accepted by lenders, but they must usually be declared formally and supported by documentation confirming that the funds are not repayable.

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Importantly, deposit requirements and flexibility vary significantly between lenders. Some are more lenient than others, which is why seeking professional mortgage advice is essential.

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Loan to Value (LTV) Explained in Detail

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Lenders assess risk using Loan to Value (LTV). This represents the percentage of the property price that is being funded by the mortgage.

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Example:

• Property price: £200,000

• Deposit: £38,000

• Mortgage: £162,000

• LTV: 81%

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If the deposit increased to £40,000:

• Mortgage: £160,000

• LTV: 80%

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That small change may move you into a lower LTV band, which can unlock lower interest rates. Mortgage pricing is often tiered at:

• 95% LTV

• 90% LTV

• 85% LTV

• 80% LTV

• 75% LTV

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This is why discussing deposit strategy with your mortgage adviser can be crucial. Increasing your deposit slightly may reduce your interest rate and long-term costs.

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Getting a Mortgage With a Small Deposit

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First-time buyers can still obtain a mortgage with a 5% deposit, but these mortgages typically:

• Carry higher interest rates

• Offer fewer lender options

• Require stricter affordability and credit checks

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At 95% LTV, lender choice becomes more limited, and application accuracy is critical. Advice from a mortgage adviser is particularly valuable in these cases, as unsuitable applications can lead to rejections that affect future lending decisions.

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Mortgage Affordability Checks Explained

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Once your deposit is accepted, lenders will assess affordability to ensure you can maintain repayments.

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Income assessment

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Lenders assess income differently depending on your employment status:

• Employed applicants

• Self-employed applicants

• Contractors

• Limited company directors

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Many lenders will also consider additional income such as:

• Overtime

• Commission and bonuses

• Second jobs

• Certain benefits

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Most lenders will offer between 4 and 5 times your income, although some specialist lenders may offer up to 6 times income, subject to strong credit history and minimum income thresholds.

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Monthly Outgoings and Credit Commitments

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Lenders will examine your regular expenditure, including:

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Monthly outgoings

• Council tax

• Transport and commuting costs

• Insurance

• Ground rent and service charges

• Utility bills

• Childcare and maintenance costs

• General living and entertainment expenses

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Debts

• Secured loans (including other mortgages)

• Unsecured loans (personal or student loans)

• Credit cards and overdrafts

• Hire purchase or car finance agreements

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These checks ensure your mortgage remains affordable under stressed interest rate scenarios.

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Additional Costs to Budget for When Buying Your First Home

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Beyond your deposit, there are several additional costs first-time buyers should plan for:

• Solicitor fees (£500 – £1,500)

• Valuation fees (£300 – £1,500)

• Survey fees (£300 – £500)

• Broker fees (£500 – £1,000)

• Mortgage application or product fees (£500 – £1,500)

• Stamp Duty Land Tax (dependent on property value and eligibility)

• Land Registry fees (approximately £100)

• Local authority searches (around £500)

• Removal and moving costs (£500 – £1,000)

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All costs are estimates and will vary depending on your circumstances.

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Application in Principle (Agreement in Principle)

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Once a realistic borrowing amount has been identified and a suitable lender selected, an Application in Principle (AIP) is submitted.

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An AIP:

• Is not legally binding

• Indicates how much you may be able to borrow

• Is usually valid for around 30 days

• Requires basic information only

• Involves a soft credit check

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An AIP allows you to view properties and make offers with greater confidence.

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Mortgage Illustration (ESIS) and Mortgage Certificate

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A Mortgage Illustration (ESIS) outlines the key facts of your mortgage, including:

• Interest rate

• Monthly repayments

• Fees

• Mortgage term

• Total cost over the term

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Your mortgage adviser will explain this document in detail to ensure you understand every aspect.

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A Mortgage Certificate may also be issued, confirming that an AIP is in place and that funds are available. Estate agents often request this before accepting an offer.

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How Much Will My Mortgage Repayments Be?

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Mortgage repayments depend on:

• Mortgage amount

• Interest rate

• Mortgage term

• Product type

• Fees added to the loan

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Small differences in interest rates can result in large long-term cost differences. Comparing lenders without advice can be misleading, which is why professional guidance is recommended.

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Family Assisted Mortgages

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Many first-time buyers are unaware of how family support can help without requiring an outright cash gift.

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Family members may:

• Use equity in their property as security

• Use savings as collateral

• Act as guarantors

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In many cases, family retain control of their assets while helping you secure better mortgage terms or borrow more.

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Is Buying Right for You Right Now?

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Buying a home is a significant financial commitment. Before applying for a mortgage, it is worth considering whether now is the right time for you.

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Path A: Ready to Buy

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You may be ready if you have:

• A stable income

• A deposit saved

• A clear idea of location and property type

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Next step: Check what you can borrow and explore suitable mortgage options.

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Path B: Not Quite There Yet

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You may still be preparing if you are:

• Still building your deposit

• Unsure about affordability

• Deciding between renting and buying

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Next step: Read our buyer planning guides to help you prepare effectively.

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Understanding the Home-Buying Process

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The buying process typically follows these steps:

1. Budgeting and deposit planning

2. Mortgage agreement in principle

3. Finding a property and making an offer

4. Legal work and conveyancing

5. Completion and moving in

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Knowing what to expect can significantly reduce stress and delays.

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Common First-Time Buyer Worries

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What if my credit history isn’t perfect?
Many lenders will consider applicants with minor credit issues depending on the circumstances and how recent they were.

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How much deposit do I really need?
While 5% is the minimum, larger deposits usually unlock better rates and more lender choice.

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What if interest rates rise after I buy?
Fixed-rate mortgages can protect you from rate rises for a set period.

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What happens if my circumstances change?
Mortgage products and protection options can be structured with flexibility in mind.

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Why First-Time Buyers Use Manor Mortgages

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First-time buyers choose Manor Mortgages because we provide:

• Independent, whole-of-market mortgage access

• Experience with complex first-time buyer scenarios

• Clear, plain-English advice without pressure or sales tactics

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Our role is to help you understand your options, avoid unnecessary rejections, and secure a mortgage that suits both your current position and future plans.