How much deposit do you need to buy your first home?

There is no single deposit that suits every first time buyer. How much you need depends on the price of the home, the lender and the mortgage, and on your own income and circumstances. This guide explains how deposits work so you can plan with your eyes open.

What a deposit is

The deposit is the part of the purchase price you pay yourself. The mortgage covers the rest. If you buy a home for £250,000 with a £25,000 deposit, you are borrowing £225,000, which is 90% of the price. That percentage is called the loan to value, or LTV.

Why the size of your deposit matters

In general, a larger deposit compared with the price gives you a lower LTV, and a lower LTV usually gives you more choice of mortgages and may mean lower interest rates. Some lenders will lend up to 95% of the price, which means a 5% deposit, but there are usually fewer options at that level and the cost can be higher. A lender will also look at your income, your outgoings and your credit history, so the deposit is only part of the picture.

Where the deposit can come from

• Your own savings
• A savings product designed for first time buyers, such as a Lifetime ISA, which can add a government bonus subject to its rules and limits
• The sale of another asset
• A gift from a family member

Rules and limits on savings products and schemes change, so check what applies to you at the time you buy.

If a relative is helping

Gifted deposits are common, but lenders have rules about them. They normally ask for a letter confirming that the money is a gift and does not need to be repaid, and they may carry out extra checks. If more than one person is helping, or the gift comes from outside the UK, tell your adviser early. It is much easier to sort this out before you make an offer than after.

The other costs of buying

Your deposit is not the only cost. Plan for:

• Legal fees for your solicitor
• A valuation or a survey
• Any tax due on the purchase, which depends on the price and the rules at the time
• Removal costs and the cost of furnishing your new home
• Any arrangement fee for the mortgage

How much could you borrow?

Lenders look at your income, regular outgoings and debts, and the size of your deposit. The amount can differ from one lender to another, so it helps to speak to an adviser before you start viewing. You can read more about how we help on our first time buyer page, or see how it works in your area on our areas we cover page.

Talk it through

Every buyer's situation is different. If you would like to talk through your deposit and your options, get in touch.