How much deposit do you need as a first time buyer?

A mortgage deposit is the portion of the property price you pay upfront from your own savings. The rest is covered by your mortgage. For example, if you buy a home worth £250,000 and put down a £25,000 deposit, you borrow £225,000 from your lender.

Lenders express deposits as a loan-to-value (LTV) ratio. A £25,000 deposit on a £250,000 property equals 90% LTV, meaning the lender is providing 90% of the value. The lower your LTV, the less risk the lender takes on, which is why larger deposits unlock better interest rates.

As a first time buyer, you have never owned property before, which means you qualify for specific benefits. These include first time buyer mortgage products with preferential rates, stamp duty relief on properties up to £425,000, and access to government savings schemes designed specifically to help you get on the property ladder.

The minimum deposit most UK lenders accept is 5%, though some specialist products have briefly offered lower thresholds in the past. The practical reality is that saving a bigger deposit improves every aspect of your mortgage application: better rates, more lender choices, lower monthly payments, and a stronger position if property values dip.

The amount you need depends on the property price and the LTV ratio you're aiming for. Here's what different deposit levels look like at common UK house prices for first time buyers.

The average first time buyer in the UK currently pays around £230,000 for their first property, though this varies enormously by region. In London, first time buyers pay an average of roughly £430,000, while in the North East, the figure sits closer to £145,000.

A useful rule of thumb: aim to save at least 10% if you can. The jump from 5% to 10% deposit makes one of the biggest differences to your mortgage rate, often reducing your interest by 0.3% to 0.5%. On a £200,000 mortgage over 25 years, that could save you £10,000 to £18,000 in total interest.

If you can only manage 5%, don't let that stop you from exploring your options. Many excellent 95% LTV mortgage products are available, and getting onto the property ladder sooner means you start building equity earlier.

Mortgage lenders price their products in LTV bands. Each time you cross into a lower LTV bracket, you gain access to better rates. The most significant rate drops happen at these thresholds: 90% LTV, 85% LTV, 80% LTV, 75% LTV, and 60% LTV.

The difference is substantial. Moving from 5% to 15% deposit on a £200,000 property saves around £221 per month and over £46,000 in total interest over the mortgage term. Even a small increase in your deposit can make a meaningful difference to your monthly budget.

Remember that these rates change regularly. To see what deals are available at your specific deposit level, it is worth speaking with a mortgage broker who can search across the whole market for the best rate at your LTV.

Lenders need to verify the source of your deposit as part of anti-money laundering regulations. They will ask for evidence showing where the money has come from. Acceptable deposit sources include:

• Personal savings: Bank statements showing regular saving over time. This is the most straightforward source and lenders view it positively as it demonstrates financial discipline.
• Gifted deposit: Money given to you by a family member, usually a parent or grandparent. The person gifting must provide a signed letter confirming it is a gift (not a loan) and supply their own ID and proof of funds.
• Inheritance: Money received from a deceased relative's estate. You will need probate documentation or a solicitor's letter confirming the inheritance.
• Savings schemes: Lifetime ISA bonuses, Help to Buy ISA bonuses (if opened before November 2019), or other investment returns.
• Sale of assets: Proceeds from selling a car, investments, or other valuables, supported by documentation.

Sources that lenders will not accept include borrowed money (personal loans, credit cards, or undeclared loans from family), gambling winnings without clear documentation, and cash savings that cannot be traced through bank statements.

A gifted deposit is extremely common among first time buyers. According to research from Legal and General, around 46% of first time buyers receive help from family. If you are relying on a gift, make sure your family member understands they will need to provide documentation, and that most lenders require the gift to be non-refundable with no expectation of repayment.

Some lenders accept a combination of sources. For example, you might use £15,000 from your own savings plus a £10,000 gift from your parents. Both sources will need to be evidenced separately. A specialist first time buyer advisor can guide you through exactly what documentation your chosen lender requires.

Several government-backed schemes can help you save for your deposit faster or reduce how much you need.

Lifetime ISA (LISA)

The Lifetime ISA lets you save up to £4,000 per tax year toward your first home, with the government adding a 25% bonus. That means you receive up to £1,000 in free money each year. Over four years of maximum contributions, you could accumulate £20,000 in savings plus bonuses.

Key rules: you must be aged 18 to 39 to open one, the property must cost £450,000 or less, and you must have held the LISA for at least 12 months before using it. If you withdraw for any purpose other than buying your first home or retirement, you will face a 25% withdrawal penalty, which means you actually lose some of your own money.

Shared ownership

Shared ownership lets you buy a share of a property (between 25% and 75%) and pay rent on the remaining share. Your deposit is calculated on the share you buy, not the full property value. For a £250,000 home where you buy a 50% share, a 5% deposit would be just £6,250 instead of £12,500.

First Homes scheme

The First Homes scheme offers newly built properties to first time buyers at a discount of 30% to 50% off the market price. The discount is passed on to future buyers, so the home always stays affordable. Eligibility criteria include a household income under £80,000 (£90,000 in London) and the discounted price must be no more than £250,000 (£420,000 in London).

Mortgage guarantee scheme

This government-backed scheme encourages lenders to offer 95% LTV mortgages by providing them with a guarantee. It does not directly help you save, but it means more lenders are willing to accept a 5% deposit, giving you greater choice and potentially better rates at the highest LTV tier.

Your deposit is the largest upfront cost, but it is not the only one. First time buyers often underestimate the additional fees involved in purchasing a property. Budget for these costs on top of your deposit to avoid any surprises.

First time buyers benefit from stamp duty relief in England and Northern Ireland. You pay no stamp duty on properties costing up to £425,000, and a reduced rate of 5% on the portion between £425,001 and £625,000. Properties above £625,000 do not qualify for any first time buyer relief.

Some mortgage products come with free valuations or cashback that can offset these costs. Your mortgage affordability calculation should factor in these additional expenses alongside your deposit, so you know the true total you need before you start viewing properties.

A good rule of thumb is to add £3,000 to £5,000 on top of your deposit target to cover these costs comfortably. This prevents you from having to borrow or use credit for fees after stretching to make the deposit.