How Much Deposit Do First-Time Buyers Need in the UK?

First-Time Buyer Deposit Options in the UK: £5,000 Deposits, Rent Track, Record & 100% Mortgages

How Much Deposit Do You Need as a First-Time Buyer in the UK?

One of the very first questions most first-time buyers ask is:

“How much deposit do I actually need to buy a home?”

And honestly — the answer isn’t always as simple as people expect.

You’ll often hear one percentage quoted online, but in real life your required deposit depends on several factors, including:

• The mortgage lender
• The type of property you’re buying
• Your income and affordability
• Your credit history
• Whether the deposit is savings, gifted, or equity

This guide explains how deposits work for first-time buyers in the UK, what lenders usually look for, and some common misconceptions to be aware of.

⚠️ This information is for general guidance only and does not constitute mortgage advice. Every lender assesses applications differently and criteria can change.

What is a mortgage deposit?

A mortgage deposit is the amount of money you contribute towards the purchase price of a property. The remaining amount is borrowed from a mortgage lender.

Example:

• Property price: £200,000
• Deposit: £10,000 (5%)
• Mortgage: £190,000 (95%)

The size of your deposit directly affects:

• Which lenders you can access
• The interest rates available
• Your monthly mortgage payments
• How much risk the lender is taking

This is why deposit size plays such a big role in mortgage applications.

What is the minimum deposit for a first-time buyer?

In the UK, many lenders currently offer mortgages with a minimum deposit of 5% of the property value.

However, it’s important to understand that:

• Not everyone qualifies for a 5% deposit mortgage
• Lender criteria can change at any time
• Interest rates are usually higher at 95% loan-to-value (LTV)

Typical deposit levels:

• 5% deposit – limited lender choice, higher rates
• 10% deposit – more lenders and better pricing
• 15–20% deposit – widest choice and lower rates

A bigger deposit isn’t always essential — but it can provide more flexibility.

What does loan-to-value (LTV) mean?

You’ll often hear the term loan-to-value, or LTV.

This simply means the percentage of the property value you are borrowing.

• 95% LTV = 5% deposit
• 90% LTV = 10% deposit
• 85% LTV = 15% deposit

The lower the LTV, the less risk for the lender — and typically the better the interest rate.

Why does deposit size matter to lenders?

From a lender’s perspective, the deposit represents risk.

A larger deposit:

• Reduces the lender’s exposure
• Can unlock better interest rates
• May make affordability assessments easier

A smaller deposit:

• Limits lender choice
• Often involves stricter criteria
• Usually comes with higher interest rates

Smaller deposits aren’t “bad” — they just come with different rules.

Can first-time buyers use gifted deposits?

Yes — in many cases, first-time buyers can use a gifted deposit, usually from parents or close family members.

Each lender has its own criteria, but generally:

• The money must not be repayable
• The person gifting must sign a gifted deposit declaration
• ID and source-of-funds evidence is required

What about family loans?

Some lenders will accept a family loan as deposit, but:

• Lender choice becomes very limited
• Monthly repayments are included in affordability
• Formal loan agreements are often required

Because of this, gifted deposits are usually far more straightforward than loans.

Can first-time buyers use gifted equity as a deposit?

Yes — this is known as gifted equity.

What is gifted equity?

Gifted equity is most commonly used when buying a property from:

• A family member
• A landlord
• A relative selling below market value

Instead of gifting cash, the seller agrees to sell the property at a reduced price.

Example:

• Market value: £200,000
• Purchase price: £180,000
• Gifted equity: £20,000

That £20,000 difference acts as your deposit.

Not all lenders allow gifted equity, and documentation is essential — but it can be an excellent option for some buyers.

What funds can be used as a deposit?

Accepted deposit sources often include:

• Personal savings
• Lifetime ISA (LISA)
• Inheritance
• Trust funds (if legally accessible)
• Sale of assets (e.g. car already sold)
• Divorce or separation settlements
• Work bonuses (subject to timing and evidence)
• Builder incentives on new-build properties

Lenders will usually require:

• Clear bank statements
• Evidence of where the money came from
• Proof funds are accessible before exchange

Transparency is crucial — unclear or undisclosed funds can delay or even derail applications.

Do first-time buyers need money for costs as well?

Yes — and this is one of the biggest surprises for buyers.

Alongside your deposit, you’ll also need to budget for:

• Solicitor or conveyancing fees
• Mortgage valuation fees
• Homebuyer or structural surveys
• Mortgage product fees (if applicable)
• Moving costs
• Stamp Duty (England) - if applicable
• Land Transaction Tax (Wales) - if applicable

Being unprepared for these costs can put serious pressure on your finances later.

Does a bigger deposit guarantee a mortgage?

No.

While a larger deposit helps, lenders also assess:

• Income and employment stability
• Credit history
• Monthly commitments
• Existing debt
• The property itself

Deposit alone does not guarantee approval.

Common first-time buyer deposit myths

“I need a 20% deposit to buy a house.”

Not true. Many first-time buyers purchase with 5–10%, depending on circumstances.

“Once I’ve saved my deposit, everything else is easy.”

The deposit is just one part — affordability and credit checks still apply.

“Any money in my account counts as a deposit.”

Lenders must understand exactly where the funds came from.

The simple lender rules deposits must follow

Your deposit must be:

• Traceable
• Legitimate
• Not repayable in most circumstances
• In your bank account before exchange of contracts

If any part of the deposit fails these checks, lenders may decline the application.

What about the £5,000 deposit mortgage?

You may have seen headlines about a £5,000 deposit mortgage for first-time buyers.

This type of mortgage is usually a fixed minimum deposit product of £5,000 (so it’s not strictly “5% deposit”) availability and criteria can change.

How the £5,000 deposit mortgage works

Instead of needing a percentage deposit, the lender accepts a minimum deposit of £5,000.

Example:

• Property price: £200,000
• Deposit: £5,000
• Mortgage: £195,000

Because that’s a very high loan-to-value mortgage, eligibility checks are usually stricter.

What lenders typically look for

This varies by lender, but can include things like:

• You’re a first-time buyer (or at least one applicant is)
• Good credit history (clean conduct matters more at higher LTV)
• Strong affordability (including stress testing)
• Property restrictions (e.g. maximum purchase price, new build limits, etc.)

Important: the £5k deposit mortgage is not the same as the renters’ mortgage (below). You don’t automatically need 12 months of rent history for the £5k product — it’s mainly about meeting the lender’s criteria and affordability.

What is a 100% mortgage

A 100% mortgage allows you to buy a property with no deposit at all (100% LTV).

A couple of examples you might hear about are:

• Rent-based 100% mortgages (Track Record Mortgage) where your rental history is a key part of eligibility.
• No-deposit 100% mortgages offered by certain lenders — again, with strict affordability and credit checks.

These mortgages are not widely available and typically:

• Have higher interest rates than standard deals
• Include stricter affordability testing
• Often require strong credit conduct

They can be a real route onto the ladder for the right person — but they need careful checking against lender criteria.

Important things to understand about low or no-deposit mortgages

While £5,000 deposit and 100% mortgages can be helpful, it’s important to understand:

• Your monthly payments are usually higher
• Interest rates are typically above standard market rates
• You may build equity more slowly in the early years
• Fewer lenders offer these products

They can be a stepping stone — but they must be approached carefully and with full understanding of the risks.

Final thoughts on first-time buyer deposits

Saving a deposit is a huge achievement — and often the hardest part of buying your first home.

Understanding:

• How deposits work
• What lenders look for
• Which sources are acceptable
• How deposit size affects rates and affordability

can make the entire mortgage journey far less stressful.

This article provides general information only. Mortgage eligibility and suitability depend on individual circumstances, and lender criteria can change at any time. Speaking to a mortgage adviser can help you understand exactly how deposit requirements apply to your situation.