You will hear “10% deposit” repeated as if it is the answer to all mortgage questions. It is not. It is a floor for most buyers, not a target — and the right number for you depends on the property price, the rates available at each deposit level, and how long the extra saving would take. Here is how to work out your actual number.
What loan-to-value (LTV) means and why lenders care
Your deposit determines your loan-to-value ratio: the mortgage as a percentage of the property price. Put down £20,000 on a £200,000 home and you are borrowing £180,000 — 90% LTV. Lenders price by LTV tier because it measures their risk: the more equity you hold, the more the property price can fall before the lender is exposed. Cross a tier boundary and you unlock a different — usually cheaper — set of products.
- 95% LTV (5% deposit): Available, but from a smaller pool of lenders at the most expensive rates. Viable when saving faster than prices are rising is unrealistic, but expect to pay noticeably more per month than a 90% borrower on the same house.
- 90% LTV (10% deposit): The practical entry point for most first-time buyers. Lender choice opens up substantially.
- 85% LTV (15% deposit): Meaningfully better rates. If you are within six months of reaching this tier, the extra saving is usually worth it.
- 80% LTV (20% deposit): Access to most of the market's competitive deals.
- 75% LTV and below: The best rates available. Typically reached by home movers with sale equity rather than first-time buyers.
The differences compound. On a £200,000 mortgage, the rate gap between the 90% and 85% tiers has typically been worth £30–£60 per month — £400–£700 a year, every year of the fixed period, for the same property. Model the tiers before deciding your savings target: sometimes three more months of saving buys you five years of lower payments.
A worked example: the same flat at three deposit levels
| Deposit | LTV | Amount borrowed | What it means |
|---|---|---|---|
| £12,500 (5%) | 95% | £237,500 | Highest rates, fewest lenders, strictest affordability checks |
| £25,000 (10%) | 90% | £225,000 | Mainstream choice of lenders and products |
| £37,500 (15%) | 85% | £212,500 | Better rates and a smaller loan — lower payments from both directions |
Based on a £250,000 purchase. Note the double effect in the last row: a bigger deposit lowers the rate and shrinks the loan the rate applies to.
What counts as a deposit — and what does not
- Savings: The straightforward case. Expect to show statements demonstrating where the money accumulated — this is a legal anti-money-laundering requirement, not the lender being nosy.
- A gifted deposit: Money from family is accepted by most lenders, but it must be a genuine gift, not a loan. The giver signs a letter confirming they expect no repayment and will hold no stake in the property, and they will be identity-checked too. Tell your broker and solicitor about a gift early — disclosing it late is a common cause of delayed completions.
- Equity from a sale: For home movers, the deposit is usually the proceeds of the current home. Your conveyancer handles the flow of funds; your mortgage offer will be conditional on the sale completing.
- What does not count: Personal loans, credit card advances, and borrowed money of any kind. Lenders check the source of funds, and undeclared borrowing discovered during underwriting can sink the application entirely.
The Lifetime ISA: free money with a sharp edge
If you are a first-time buyer aged 18–39, the Lifetime ISA adds a 25% government bonus to savings of up to £4,000 per tax year — up to £1,000 of free money annually. Over four years of maximum contributions, that is £4,000 the government adds to your deposit. Two conditions have caught buyers out:
- The £450,000 property cap: Use LISA funds on a home above £450,000 and the 25% withdrawal penalty applies — which claws back more than the bonus, leaving you with less than you paid in. If you are buying in London or the South East, check likely purchase prices against the cap before committing years of saving to this vehicle.
- The 12-month rule: The account must have been open at least a year before you use it for a purchase. Open one with a small amount early, even if you are not ready to save seriously yet.
The deposit is not the only cash you need
A common first-time buyer mistake is saving exactly the deposit and nothing more. On top of it, budget for:
- Stamp duty: Zero for most first-time buyers under £300,000, but it scales quickly above that — see our stamp duty guide for the bands and worked examples.
- Legal fees: Typically £1,000–£2,000 including searches, more for leasehold.
- Survey: Roughly £400–£1,500 depending on level and property value.
- Moving, and a buffer: Van hire or removals, plus enough left over that a boiler failure in month two is an annoyance rather than a crisis. Arriving in a new home with literally zero savings is how good purchases turn into bad years.
So what should you actually aim for?
Work backwards from real properties, not abstract percentages. Take the price of the kind of home you actually want to buy, calculate 10% of it, add £3,000–£5,000 for costs and buffer — that is milestone one. Then model whether the 15% tier is reachable within six to twelve months. If it is, the improved rate usually repays the wait. If it would take three more years, buy at 90% — in a rising market, waiting has a price too, and the tier maths never captures the years spent renting in the meantime.
Calculate your mortgage range with your current income and deposit →