How much deposit do I need to buy a house?

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How much deposit do I need for a mortgage?

If you’re looking to buy a property, you’re going to need a hefty mortgage deposit. The minimum deposit for a house is usually 10% of the property’s value, but having a 15% deposit or more could help you secure the best mortgage rates.

In the wake of the Covid-19 pandemic, more lenders are asking for at least 15%, probably because they are worried about the economic uncertainty causing house prices to fall. First-time buyers in London must therefore find more than £70,000 to buy a home in the capital as of May 2020. Fortunately, the average deposit for a house in other parts of the country is a lot lower because it costs less to buy a home.

If finding a 10% house deposit seems impossible, fear not – a new government-backed mortgage scheme to help people with 5% deposits get on the housing ladder was made available from 19 April 2021.

When it comes to mortgage deposits, bigger is better

If you are asking yourself ‘What deposit do I need to buy a house?’ the simple answer is – as large as possible. 

Saving for a bigger mortgage deposit makes you a safer investment for a mortgage lender. This is because, even if house prices fall by say 10%, the lender should be able to recoup its money from the sale of the property. With a bigger house deposit, you will therefore be offered lower mortgage interest rates.

The ratio between the deposit and the mortgage is known as the loan to value (LTV) ratio. For example, if you have a 10% deposit, you will need 90% from the lender, or a 90% LTV mortgage.

The higher the LTV, the higher the interest rate.

How to save for a house deposit

Saving for a deposit can feel like a daunting task. But there are lots of tips and tricks that you can use to reduce how long it takes to buy a house in the UK. Assess the housing market to find out what affordable property prices are like near you and you should be able to answer your earlier question of: ‘How much deposit do I need for a house?’ Work out what you would need, deduct your savings – and you are left with the sum you will have to find from other sources.


Trimming household expenses is a great way to free up extra cash. To work out how much you could potentially save, study your incomings and outgoings closely. Banking and budgeting apps make doing this a lot easier.

When you can see where each pound us currently going, you can figure out the best way to manage your money by setting up a budget.

Cut back on non-essentials

Now's the time to try and cut back on some of those little luxuries.

Could you, for example,

  • Cancel the gym and run outside/use YouTube for free exercise classes?

  • Bring your own lunch to work?

  • Buy second hand, not new?

  • Buy supermarket own brand groceries?

What you spend is personal to you. And only you know what you are prepared to go without to save for a deposit for a house.

Manage existing debts

Avoid wasting money paying high interest on existing debts.

Instead, shift your debt to a 0% balance transfer card or 0% money transfer card.

A balance transfer will not get rid of your debt, but it will reduce the amount of interest you need to pay. So, you can pay your existing debt off quicker and start saving sooner.

Maximise your savings

Set up a direct debit to move your spare cash into a savings account as soon as you get paid.

The aim is to earn as much interest as possible, so shop around for the best savings account for you. This may be a high-interest account linked to your current account, or a tax-free ISA (Individual Savings Account). 

Sell items you no longer need

Look through your belongings and think carefully about if you use or need them. If not, sell them.

Car boot sales and eBay are not your only options. Check out alternatives like Shpock, Depop and Gumtree too.

Ask friends and family for help

If you're lucky enough to have friends or family with money to spare, they might be able to help you raise a mortgage deposit, or help you get a guarantor mortgage.

How long does it take to save a deposit to buy a house?

The short answer is: between 2 and 15 years.

The longer answer is: it depends on how much you can put into savings each month, and how much deposit for a house is required.

In almost all cases, you will need a deposit of at least 5% of the property price. But the average house deposit for a first time buyer in the UK is around 15%.

The bigger the deposit, the lower your mortgage interest rate and the smaller your monthly repayments.

According to the Office of National Statistics, in December 2020, the average house price in the UK was £252,000. On that amount, a 5% deposit is £12,600 and a 15% deposit is £37,800.

So, if you can save £200 per month it would take you over 5 years to save up a 5% deposit... or nearly 16 years for the 15% deposit!

Keep reading to find out how to save a deposit in significantly less than 15 years.

How to save for a deposit on a house quickly

If you’re a little impatient, there's some things you can do to speed up the deposit saving process.

How to get a house deposit quickly

If you’re impatient to get a foot on the housing ladder, there are some things you can do to speed up the deposit saving process.

Boost your savings with a Lifetime ISA 

If you’ve already got some savings, you could increase them by saving smart.

  • Lifetime ISA

If you have never owned a property before (and are aged between 18-39) you can save up to £4,000 a year tax free in a Lifetime ISA. What’s more, the government will add an extra 25% bonus on top, meaning that after the first year you could have £5,000. And you can continue to save in the same way (and earn the bonus) in subsequent years until you have built up a large enough house deposit.

Bear in mind you need to have saved for a minimum of one year to be able to withdraw your cash and keep the bonus and the money must be used to purchase a property or for retirement. So, it’s not the best option if you need your money sooner.

  • Help to Buy ISA (closed to new accounts)

If you have a tax-free Help to Buy ISA (which are now closed to new customers) this allows you to save £2,400 per year. When you withdraw the money to buy your first property, the government will top up the amount by 25% - up to a maximum of £3,000. This brings the total you can save to £15,000. This is only applicable if you already have the account. Otherwise, your alternative option is the Lifetime ISA, which was introduced to replace the Help to Buy ISA.

Reduce your rent

Rent is probably your biggest monthly expense. Reducing your rent by moving somewhere more affordable could help you save up for a house deposit more quickly.

  • Move somewhere with cheaper rent

Think carefully about how much you’re currently spending on rent and ask yourself if you could be paying less by moving to a different area or a smaller property? Remember to factor in moving costs when making your decision.

  • Move back with your parents

If your parents live close enough to where you work, could you move back in with them for a while? You could save £1000s in rent and dramatically speed up how long it takes you to buy your own place.

  • Get a housemate 

It may feel like a backwards step but think about your potential savings. It’s probably worth it in the long run.

Getting a loan for a mortgage deposit

You're unlikely to get a mortgage if you use a personal loan to pay for your house deposit.

When you apply for a mortgage, lenders will look at any debts you are currently paying off. By taking out a loan or using a credit card to pay your deposit, you significantly reduce your chances of being approved for a mortgage.

Getting a mortgage with 0% deposit

It’s possible to buy a property with no deposit through a 100% LTV mortgage.

But only a few lenders offer this option and the interest rates on 100% LTV mortgages are very high. This means it will take a lot longer to pay off your mortgage and you will pay more in interest. Your monthly repayments will also be higher which could make life a lot more difficult.

Getting a mortgage with a small deposit

If you have a small house deposit, you could use one of the government's Help to Buy schemes to secure a mortgage.

Buy a house with Equity Loan

If you are a first time buyer and you can save up a 5% deposit, you might be able to use the government's Help to Buy Equity Loan scheme.

With this scheme, the government lends you up to 20% of the property’s value (or 40% in London), meaning you only need a 75% (or 55%) LTV mortgage from a participating lender. The loan is interest free for 5 years, after which time most people sell the property to repay the loan and use any extra money to buy a new home.

Buy a house with Shared Ownership

With Shared Ownership, you need a smaller deposit because you only buy between 25% and 75% of a property. However, your monthly outgoings will be roughly the same as if you bought the whole property because you have to pay rent on the part you don’t own.

House deposits and remortgages

If you're remortgaging, you can use the equity you already have in your home as a deposit.

Equity is the difference between the market value of your home and the outstanding balance left on the mortgage. So, say you sell your house for £250,000, and have £150,000 left to pay on your mortgage, your equity will be £100,000.

Unless your house has gone up in value, you will not have equity when you remortgage from an interest only deal.

House deposit for a second home

To buy a second home, you will probably need a deposit of at least 25%.

You are likely to have to pay a higher interest rate on a second home mortgage and will also need to prove you can afford the payments on two mortgages.

Deposit for a buy to let mortgage

The minimum deposit for a buy to let mortgage is usually at least 25% of the property’s value. As with other types of mortgages, a bigger deposit will give you access to lower interest rates. To improve your chances of getting a buy to let mortgage, you will also need strong rent prospects and a healthy credit history.

7 May 2021