How much deposit do you need for a mortgage?

How much deposit do I need for a mortgage? What’s the average First Time Buyer deposit?

The minimum deposit is normally 5%, and the average First Time Buyer deposit is around 10%. This is mainly from savings or a gift from parents. Most people try and get 10% together if they can.

What does a bigger house deposit mean for my Loan to Value – what does Loan to Value (LTV) mean?

Loan to Value is how much you’re borrowing compared to the value of the property. For example, a 90% Loan to Value means you have a 10% deposit. A bigger house deposit means a lower Loan to Value, which is better in terms of interest rates – as it’s a lower risk for the lender.

How much should I save and how can I save for a deposit?

If the property value is £300,000, the minimum you’ll need to save is £15,000 – that’s 5%. The more you save, the lower the rate of interest you’ll pay on the mortgage.

Saving is all about reducing the amount you spend on the good things in life, for a while, and being more stringent with your spending.

It’s right to put something away into a separate account every month. It is a lot easier if there are two of you doing it – both in the saving aspect and also on the amount you can borrow, as well.

With two people’s income, obviously, you can borrow a lot more. It is a lot harder for one person to do it, but it can be done.

Can I get a mortgage with a zero percent deposit? What’s the minimum deposit for a house?

I said the minimum was 5% because that’s true for pretty much every lender out there.

But there is one lender actually that will do a 100% mortgage, with no deposit, but it has very tight criteria [podcast recorded in October 2024]. You need to have certain things. The lender needs to see what you’ve paid in rent and that you’ve paid all the household bills for at least 12 months out of the last 18 months. That can potentially get you a 0% deposit.

For this mortgage, the monthly payment has to be 120% of what you currently pay, and you have to be a First Time Buyer.

A lot of rules are in place for this 0% deal. It is achievable, although not for many clients. We’re happy to have a look at that option for you.

How much can I borrow with a 5% mortgage deposit?

The risk to a lender is high on a 5% deposit mortgage, so the amount of borrowing is reduced. They may bring down the income multiples that you can borrow.

The amount that you can borrow is based on your income and any credit commitments that you have, plus any dependents you have, such as children or vulnerable adults, in some cases.

We need to have a chat about these things to give you an idea of what your maximum borrowing amount will be – because all these factors come into it.

Can you get a mortgage with a 10% deposit?

Yes, you can. It means the risk to the lender is slightly lower, so the borrowing could be slightly more. Again, we would have to assess the whole situation.

Will I need another deposit when moving house?

Yes, you will, but you generally wouldn’t need to save up because the deposit would normally come from the equity in your current property.

You would hope that your home has increased in value since you purchased it, and you’ve been paying your mortgage down. That should usually give you enough deposit, depending on how long you’ve had the property.

The money you’ve paid off, the deposit that you originally paid and the increase in value all combine, so hopefully you wouldn’t have to save any extra to buy a new property of increased size and value.

Who do I pay my mortgage deposit to?

You’d pay the solicitors the deposit when exchanging contracts, which is quite far down the line in the process. It happens towards the end of the purchase journey.

Can my parents contribute towards my deposit? Should I borrow money from my family for a bigger deposit?

Yes, a gift from parents is quite a common source of a deposit. For nearly all lenders it would have to be a non-repayable gift.

There’s one lender out there that will accept a loan as a deposit, but they would factor in the monthly payments on that loan as a commitment when calculating your affordability. That therefore brings down the amount that you can borrow on the mortgage.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.