For most first-time buyers, the deposit is the biggest hurdle between renting and owning. It is also the area where people have the most questions, from how much is enough to whether there are schemes that help.
V5 Solutions has gathered the questions we hear most often and answered them below. The aim is to help you build a realistic plan, avoid costly shortcuts and arrive at a mortgage application in good shape.
How Much Deposit Do You Need for a Mortgage?
The minimum most lenders accept is 5% of the property price. A larger deposit reduces your loan to value, which is the size of the mortgage compared with the home's value. Lower loan to value generally gives you access to more mortgage deals and better rates, so every extra percentage point you save can make a difference over the life of the mortgage.
On a £200,000 home, for example, a 5% deposit is £10,000 and a 10% deposit is £20,000. Remember to budget separately for legal fees, surveys, lender fees, moving costs and any Stamp Duty Land Tax due (Land and Buildings Transaction Tax in Scotland, Land Transaction Tax in Wales).
What Is a Lifetime ISA and How Does It Work?
A Lifetime ISA is a government-backed account for people who open it between the ages of 18 and 39. The key points are:
- You can save up to £4,000 per tax year, which counts towards your overall ISA allowance.
- The government adds a 25% bonus on what you pay in, worth up to £1,000 a year.
- You can use the money towards a first home costing £450,000 or less, provided you opened the account a year or more before using it.
- Withdrawing for any other reason before age 60 (except terminal illness) usually triggers a 25% charge, which wipes out the bonus and takes a slice of your own money too.
It is designed for people who expect to buy within the price limit. Whether it suits you depends on your circumstances, including local property prices and how certain you are about buying, so the withdrawal charge is worth weighing carefully. MoneyHelper and GOV.UK both explain the rules in full.
How Can You Save Your Deposit Faster?
There is no single trick, but several small changes combined can make a real difference:
- Automate it. A standing order on payday makes saving the default rather than an afterthought.
- Audit regular bills. Insurance, energy, phone and broadband renewals are good moments to compare and switch.
- Redirect windfalls. Tax refunds, bonuses and birthday money can go straight into the deposit pot.
- Track progress. Seeing the balance climb helps you stay motivated over a goal that might take several years.
Our guide to budgeting tools and methods can help you find the spare money in the first place, and our comparison of savings accounts covers where to keep it.
What Do Mortgage Lenders Check on Your Credit File?
Lenders review your payment history, how much credit you already have, how much of it you use, and any missed payments, defaults or County Court Judgments. They also check that you are on the electoral roll. Start by getting your free statutory reports from Experian, Equifax and TransUnion and challenging anything incorrect.
In the months before an application, lenders tend to look more favourably on low credit card balances, few recent credit applications and a consistent record of on-time payments. Our article on building your credit history explains the habits that help most.
Can You Borrow the Money for a Deposit?
This is rarely straightforward. Mortgage lenders ask where your deposit has come from, and many will not accept one that is borrowed. Even where a loan is not ruled out, the monthly repayment cuts the amount the lender will calculate as affordable, which could reduce the mortgage you are offered or lead to a refusal.
A gift from family is different. Lenders often accept a gifted deposit, provided the person giving it confirms in writing that it does not need to be repaid. If you are unsure, a mortgage adviser can tell you how individual lenders treat gifts before you apply.
This article is general information, not financial advice. For free, impartial help with your own situation, visit MoneyHelper.
