Mortgage deposits, and why the percentage beats the amount

Lenders price in bands. Whether you turn up with 9% or 10% changes your interest rate by more than the extra thousand pounds would suggest.

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The short answer

The deposit is the share of the price you pay yourself, and its percentage sets your loan to value. Lenders price in bands, so moving from a 95% to a 90% loan usually cuts the interest rate. 5% is the usual minimum and around 25% is where extra deposit stops changing the rate much.

5%Usual minimum deposit

10%Where choice and pricing improve

25%Near the point of diminishing returns

25%Lifetime ISA government bonus

What is on this page

What the deposit actually does
Loan to value, and the bands that matter
Where a deposit can come from
Gifted deposits, done properly
Building it faster
If a large deposit is not realistic

What the deposit actually does

The deposit is the share of the price you pay yourself. Everything else is borrowed. That much everybody knows.

What matters more is what the deposit does to the price of the loan. Lenders price by risk, and a bigger deposit means less risk to them.

So the deposit is not a hurdle to clear. It is a dial that sets the cost of the next five years.

Loan to value, and the bands that matter

Loan to value is the loan as a percentage of the property price. A £180,000 loan on a £200,000 home is 90% loan to value.

Deposit	Loan to value	Typical effect on rate
5%	95%	Highest pricing, smallest choice of lenders
10%	90%	A clear improvement on 95%
15%	85%	Better again, and more lenders in play
20%	80%	Close to mainstream pricing
25%	75%	Around the point where further deposit adds little
40%	60%	Usually the sharpest pricing available

Bands are set by each lender and move with the market. The direction of travel is consistent even when the numbers change.

On a £180,000 loan, a rate half a percent lower costs about £50 a month less. Over a five-year fix that is around £3,000. Crossing one band can be worth more than the extra deposit.

Where a deposit can come from

Savings you have built up yourself
A Lifetime ISA, with a 25% bonus on up to £4,000 a year
A gift from a family member, with a signed letter confirming it is not a loan
Equity from a property you already own
An inheritance, with evidence of where it came from

Lenders check the source of every deposit. Money that appeared in your account recently, with no explanation, will hold up an application. Get the paperwork ready before you apply, not during.

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Send us the price range and what you have saved. We will tell you whether waiting is worth it.

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Gifted deposits, done properly

A gifted deposit is normal and lenders expect them. What they will not accept is a loan dressed up as a gift.

The person giving it signs a letter confirming the money is a gift, that they have no interest in the property, and that they will not seek repayment. Some lenders also ask for proof of where their money came from.

If the giver would ever want the money back, say so. There are lenders and structures for that. Getting caught misdescribing it is far worse.

Building it faster

The Lifetime ISA is one option if a first home is the goalA 25% bonus is a large head start. Check the property price cap and the withdrawal charge before you commit.

Aim at a band, not a numberSaving to exactly 10% or 15% is worth more than saving an arbitrary amount. Know which band you are chasing.

Keep it accessibleA deposit is not a long-term investment. It needs to be in cash you can reach on the day, not in something that might fall.

Do not raid the emergency fundCompleting with nothing behind you is how people end up on a credit card in month two. Keep three months of costs separate.

If a large deposit is not realistic

Plenty of people buy with 5%. It is more expensive, not impossible. There are also routes that lower the deposit needed rather than the rate.

Shared ownership

Buy a share

A deposit on the share rather than the whole property. You pay rent on the rest and there are service charges to check.

Guarantor and family assist

A relative helps

A family member's savings or property support the loan. Their money is at risk, so everyone needs to understand the terms.

A 95% mortgage

Standard route

Available from many lenders. Expect a higher rate and stricter criteria on credit and property type.

A set of house keys held in the hallway of a new home

Who this suits, and who it does not

Buy now if

You are already at a band boundary such as 10% or 15%
Rent is high and saving faster is not realistic
Your income is steady and your credit file is clean
You have costs and a small buffer on top of the deposit

Wait a few months if

You are within a couple of thousand pounds of the next band
The deposit would use every penny you have
You are three months from clearing a car finance agreement
A recent missed payment will drop off your file soon

Check broadband before you make an offer

Broadband speeds can vary street by street, so check the exact address before you commit. Ofcom's free checker shows which broadband speeds and mobile coverage are available at any UK property.

Check broadband at an address (Ofcom)

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Questions people actually ask

How much deposit do I need for a house?

5% is the usual minimum for a standard purchase. 10% is where the choice of lenders and the pricing improve noticeably, and 25% is around the point where a bigger deposit stops making much difference to the rate.

Is it better to save longer for a bigger deposit?

It depends how close you are to the next band. Crossing from 90% to 85% can save more in interest than the extra saving costs you in rent. Going from 25% to 30% rarely changes anything.

Can my parents give me the deposit?

Yes, and lenders expect it. They need a signed letter confirming it is a gift with no interest in the property and no expectation of repayment.

Do I need a deposit to remortgage?

No. Your existing equity takes the place of a deposit. If your home has risen in value, you may have moved into a better loan to value band without saving anything.

Does the deposit have to be in my account for a set time?

Many lenders want to see where the money came from, and some ask how long it has been held. Money that appears without explanation causes delays.

Can I use a Lifetime ISA for the deposit?

Yes, for a first home within the property price cap, after the account has been open at least twelve months. The 25% bonus makes it strong for that purpose, but withdrawals for anything else carry a charge.

What is a 100% mortgage?

A mortgage with no deposit. A small number of lenders offer versions, usually with a guarantor or a track record of paying rent. Rates are higher and criteria are tight.

Does a bigger deposit mean I can borrow more?

It increases the price you can afford, but the loan size is still capped by affordability. A large deposit does not remove the income and outgoings test.

How do I check broadband speed at a property?

Use Ofcom's free broadband and mobile checker at checker.ofcom.org.uk. Enter the property's postcode and choose the address to see which broadband speeds and mobile coverage are available before you make an offer.

Where to go next

Where these figures come from

Figures checked on 1 September 2026 and correct for the 2026/27 tax year. Rates change, so check the source before you act on a number.

Mortgage advice goes to a separately authorised firm we have vetted. The introduction costs you nothing. If you go ahead, we may be paid a fee by that firm.

Last reviewed September 2026.

Find out what your deposit actually buys you

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