How Much Deposit Do I Need?

Buying a property isn’t a snap decision, it is one of the largest financial commitments many people will ever make.

When you take out a mortgage to purchase a property, you will put down an equity amount, with the bank or lender providing the balance. That equity amount is often referred to as a ‘deposit’.

For many buyers, one question that tends to top the list is: “How much deposit do I need?” (or, perhaps, “how little deposit can I get away with?”)

The short answer is: 5% of the property’s purchase price, though most lenders prefer 10% or more and offer better rates and sometimes other incentives on deals where the mortgagee puts down 10% or more.

The longer and open-ended answer is that it depends on your circumstances, mortgage options, and long-term plans.

Why do Lenders Require a Deposit?

A deposit, in part, demonstrates to the lender that you are committed to the property, but realistically, it also reduces their risk.

If the worst were to happen and you were to become unable to make mortgage payments, the lender would ultimately be able to repossess the property and sell it to recover the money they are still owed.

The larger your deposit, the more cushion the lender has if this were ever to occur.

Why Does it Help You to Place a Larger Deposit?

Some buyers try to put down as little deposit as possible and stretch themselves on a purchase price (subject to affordability).

There is some merit to this approach; it could allow you to push for a larger property that better suits your requirements and might appreciate more in terms of capital value.

Nevertheless, aside from pressure on monthly finances, there are good reasons to try to put in as much equity as possible for the deposit.

• Lower interest rates: lenders reward mortgagees who place larger deposits by offering them better deals. That means lower monthly repayments; good for affordability, but it also allows homeowners to pay down their mortgage faster if they choose to.
• More chance of approval: Critical if you’re self-employed or have any credit history issues.
• More chance of securing a good purchase: A larger deposit can give sellers and agents more confidence in your offer, giving you a better chance of beating other buyers when the market gets more competitive.

Where to Find Your Deposit

There are various ways to fund your deposit:

• Savings (the most common route)
• Gifts from family (ever heard of the “Bank of Mum and Dad”?)
• Equity from selling your existing home
• Government schemes such as Lifetime ISAs

What you usually can’t do is take a loan to fund a deposit for a mortgage.

You should also be honest from the start about any gifts, as your broker, solicitor and the estate agent selling the property will need to undertake source of funds exercises and be able to trace the source of that money. That doesn’t simply mean saying ‘it came from my parents’, because the question then is: ‘where did they get the money from?’

It needs to be traceable back to its source – and it goes without saying that the source should be legitimate and above board.

If the money is coming from overseas, that must also be considered. Depending on which country the funds are coming from, matters could be delayed by an average of one to two weeks – or many more if coming from a country on the financial sanctions list.

This is why it is critical to divulge it to the agent, broker and solicitor if overseas funds are involved in the transaction. It helps you plan your timelines realistically and avoid any last-minute hiccups.

Final Thoughts

Your deposit puts that first step onto the property ladder within reach. Whilst 5% is technically enough to put you in contention to secure a mortgage, aiming higher will pay off in the long run with better rates, smoother approvals, and in some ways, greater choice of property – or at least, better opportunity to secure a property from the properties available.

If you’re unsure, speak to a mortgage broker. They can help you plan, recommend the right lenders, and in some cases suggest schemes that could get you moving sooner or top up your borrowing ability.

Frequently Asked Questions

How much deposit do I need to buy a property?
Usually at least 5% but aiming for 10%+ will give you access to better mortgage rates.

Can I buy a house with no deposit?
So-called 100% mortgages are rare, but they do exist. They come with strict criteria and restrictive requirements and are typically suitable only for buyers with strong guarantors.

Does a bigger deposit mean I can borrow more?
Lenders calculate how much you can borrow based on income multiples and affordability checks. But a bigger deposit can improve your overall deal.

Can I get a mortgage if I have poor credit history?
You may need a larger deposit (15–20%) to access mortgage deals, but there are specialist lenders you can work with. A qualified mortgage advisor can run through your options.

Is the minimum deposit the same everywhere in the UK?
Yes, but property prices vary region by region, so the actual cash amount needed for 5% or 10% can differ significantly – plus, stamp duty liability can change dramatically as a result.

If you’re thinking of making a move and need any advice on the current property market, e-mail Nick Harris or Teresa Ling on hello@quarters.agency – we’re here to help!