You usually need a large deposit to get a mortgage and buy a home – typically at least 5% of the property’s value. Here’s how it works and schemes to help you save, like the Lifetime ISA bonus.

What is a deposit for a mortgage?

Before you can get a mortgage, you’ll need to find a home to buy and agree a price.  The deposit is simply the part of this you’ll pay using your own money. 

Why do I need a deposit to buy a home?

Strictly speaking, you don’t need a deposit to get a home. 100% mortgages with no deposit are an option, but there are usually:

• not many to choose from, and
• risks attached.

For example, if the value of your home goes down, you could owe your mortgage lender more than it's worth – known as negative  equity. This can make it very difficult to sell or get a new mortgage deal (remortgage). So, paying a deposit essentially gives you access to more mortgage deals, which is often cheaper over the long run.

How much deposit do I need?

The amount you’ll need will depend on:

• the property’s purchase price, and
• your mortgage deal – most require a deposit at least 5% of the property’s value.  

For example, to buy a home worth £280,000, you’d usually need at least £14,000 as a deposit. 

A larger deposit usually gets you a cheaper mortgage deal

The range of mortgages you might qualify for depends on the size of your deposit. The higher your deposit, the less risky you are to lend to. This is because banks could risk going into negative equity if you don't pay your mortgage and they have to repossess your home (take it off you and sell it on).

This means that mortgage deals are usually cheaper if you have a large deposit. The cheapest are typically if you have a deposit worth at least 40% of the property’s value. Mortgage lenders call this your loan to value (LTV).  

Loan to value (LTV) explained

Loan to value is just a fancy way of saying how much of the property you’re buying using a mortgage. Here's an example for a £200,000 home:

• your deposit is £20,000 (10%)
• you get a mortgage for £180,000 (90%)
• your LTV is 90%.

Schemes to help you save for a deposit

Saving for a home can be hard, often taking many years to save up enough (our Savings calculator will work it out for you). 

But there are schemes that might help to:

• give you an extra bonus on your savings, like a Lifetime ISA, or
• offer alternative ways to buy, like shared ownership.   

Remember to budget for legal fees and other costs

On top of the deposit, you’ll usually need to pay other costs too, like:

• solicitor’s fees
• building surveys, and
• removal firm fees. 

You might also want to budget to buy furniture and other household items when you move in.