Understanding how much deposit you need is one of the first steps in your home buying journey. The deposit required affects which mortgages you can access, your monthly payments, and ultimately whether you can afford the property you want. This guide explains deposit requirements for first-time buyers, including how much you'll need in different UK regions and the schemes available to help you save.
First time buyer deposit requirements
Most first-time buyers secure mortgages with 5-10% deposits. While 5% gets you on the ladder, 10% offers significantly better mortgage terms, more lender choice, and lower monthly payments.
According to recent data, first-time buyers typically save around £50,000-£60,000 for deposits nationally, though this varies dramatically by region. The time it takes to save depends heavily on where you're buying and your income level.
Regional deposit requirements for first time buyers
Deposit requirements vary significantly depending on where you're buying:
- London: Average house price ~£535,000
5% deposit = £26,750 | 10% deposit = £53,500 - South East: Average ~£380,000
5% deposit = £19,000 | 10% deposit = £38,000 - North West: Average ~£215,000
5% deposit = £10,750 | 10% deposit = £21,500 - Scotland: Average ~£195,000
5% deposit = £9,750 | 10% deposit = £19,500
These regional differences significantly impact how long it takes to save. A first-time buyer in London might need 5-7 years to save a 10% deposit, while someone in the North West might achieve the same in 2-3 years on similar incomes.
Government schemes to help first time buyers
Several schemes exist specifically to help first-time buyers get on the property ladder with smaller deposits.
First Homes Scheme allows you to buy a new build property at 30-50% below market value, dramatically reducing the deposit you need to save. Eligibility restrictions apply based on income and local connection.
Lifetime ISA (LISA) lets you save up to £4,000 per year, with the government adding a 25% bonus up to £1,000 annually. These funds can be used for your first home deposit. If you're buying with another first-time buyer who also has a LISA, both of you can use your savings for the same property, potentially giving you up to £2,000 in annual government bonuses between you.
Shared Ownership offers a different approach entirely - purchase a 25-75% share of a property and pay rent on the remainder. Your deposit is calculated on your share, not the full property value, making it much more affordable.
Gifted deposits for first time buyers
Many first-time buyers receive financial help from family members to boost their deposit. Known as a "gifted deposit," this is money given to you towards your deposit with no expectation of repayment.
Most lenders accept gifted deposits, but they require proper documentation:
- Signed declaration confirming it's a gift rather than a loan
- Proof of the donor's identity and where the money came from (for anti-money laundering checks)
- Confirmation that the donor has no claim on the property
Gifted deposits typically range from £5,000 to £30,000, though some families gift significantly more. From a tax perspective, you can receive up to £3,000 per year tax-free in the UK. Larger gifts may be subject to inheritance tax if the donor dies within 7 years, though exemptions exist for regular gifts from income.
If saving a traditional deposit feels impossible, shared ownership offers an alternative route onto owning a home specifically designed for first-time buyers who can't afford to buy outright.
Rather than buying a property outright, you purchase a 25-75% share (typically starting at 25%) and pay rent on the remaining share owned by a housing association. Instead of needing £20,000 for a 10% deposit on a £200,000 property, you might only need £5,000 for a 10% deposit on a 25% share (£50,000).
You're still paying monthly costs through combined mortgage and rent, but the upfront barrier is dramatically lower. However, shared ownership comes with restrictions around alterations, subletting, and resale that you need to understand fully.
What is a house deposit?
A house deposit is the upfront cash payment you make towards buying a house, expressed as a percentage of the purchase price. The remaining amount is covered by a mortgage, which you repay over an agreed term.
For example, on a £200,000 property with a 10% deposit, you pay £20,000 upfront and borrow £180,000 through a mortgage.
The deposit serves two purposes: it demonstrates to lenders that you can save and manage money, and it reduces their risk by ensuring you have equity in the property from day one.
How deposit size affects your mortgage
The size of your deposit directly impacts three things: the interest rate you'll pay, your monthly repayments, and which lenders will consider you.
Interest rates: Larger deposits mean lower rates. The difference between a 5% and 10% deposit can mean hundreds of pounds per month in interest charges.
Monthly repayments: You're borrowing less with a larger deposit, which reduces monthly repayments even before considering the better interest rate.
Lender choice: Some lenders only offer mortgages above certain LTV thresholds, so a 5% deposit limits your options significantly compared to a 10% or 15% deposit.
A larger deposit can also compensate for lower income or slight credit issues, making mortgage approval easier for first-time buyers with non-standard circumstances.
Typical deposit percentages explained
Deposit | LTV | Best for | Key benefit | On £200k property |
5% | 95% | FTBs with limited savings | Gets you on the ladder | £10k deposit, £190k borrowed |
10% | 90% | Most first-time buyers | Better rates, more lender choice | £20k deposit, £180k borrowed |
15% | 85% | Those who've saved longer | Noticeably better rates | £30k deposit, £170k borrowed |
20% | 80% | The "ideal" level | Best rates, lowest payments | £40k deposit, £160k borrowed |
25%+ | 75%+ | Cash-rich buyers | Very best rates available | £50k+ deposit |
The jump from 5% to 10% deposit makes the biggest difference in terms of lender options and mortgage rates. While 20% is often called the "ideal" deposit, 10-15% is the realistic target for most first-time buyers.
How to calculate the deposit you need
Research house prices in your area
Check property websites like Rightmove or Zoopla to see realistic prices for the type of property you want in your preferred locations.
Choose your deposit percentage
Most first-time buyers aim for 10%, which balances affordability with access to decent mortgage deals. If you can stretch to 15%, you'll access notably better rates.
Calculate the amount
Multiply the property price by your deposit percentage:
- £200,000 property × 10% = £20,000 deposit
- £250,000 property × 10% = £25,000 deposit
- £180,000 property × 15% = £27,000 deposit
Check mortgage affordability
Lenders typically offer mortgages of 4-4.5 times your annual salary. If you earn £40,000, you can likely borrow £160,000-£180,000. This means you need properties priced at your borrowing amount plus your deposit. Our mortgages for first time buyers guide explains the different types available and how to get the best rates.
Factor in additional costs
Budget for solicitor fees (£1,000-£1,500), surveys (£300-£1,000), stamp duty if applicable, and moving costs. Plan for an extra £3,000-£5,000 on top of your deposit.
When do you actually pay your deposit?
Understanding the payment timeline helps with financial planning.
Reservation fee (optional): Some sellers or new build developers require a small reservation fee (£500-£2,000) to take the property off the market. This is usually deducted from your final deposit, but check the terms carefully.
Exchange of contracts: The main deposit payment - typically 10% of the purchase price - comes at exchange. This is when you and the seller both sign contracts and become legally committed. Your solicitor holds this deposit securely until completion.
Completion: The remaining 90% is transferred 1-4 weeks after exchange, funded by your mortgage and any remaining savings. You receive the keys on completion day.
Tips for saving your deposit faster
- Open a Lifetime ISA to take advantage of the 25% government bonus if you're a first-time buyer
- Automate savings by setting up a standing order on payday before you can spend
- Review spending - cut unused subscriptions, reduce eating out, consider cheaper contracts
- Increase income through negotiating a raise, freelance work, or selling unwanted items
- Reduce rent - moving to a £200/month cheaper rental saves £2,400 per year
Next steps for first time buyers
Understanding deposit requirements is the foundation of your home buying journey. Once you know your target deposit amount:
- Open a Lifetime ISA if you're a first-time buyer
- Get a mortgage in principle to understand your borrowing capacity
- Start viewing properties within your budget
- Instruct a conveyancing solicitor when you're ready to make an offer
At Homeward Legal, we provide expert conveyancing services for first-time buyers, guiding you through every step from offer to completion. Our fixed-fee service includes no completion, no fee protection, giving you peace of mind throughout your purchase.
Call to speak with one of our friendly experts, or get your instant conveyancing quote today.
Frequently asked questions about house deposit
What happens to my deposit if the sale falls through?
Before exchange, your deposit is held by your solicitor and returned to you in full. After exchange, if you pull out you forfeit it. If the seller pulls out, you get it back in full and can pursue them for breach of contract.
What if I only have a 5% deposit but exchange requires 10%?
You'll need to bridge the gap from somewhere: savings set aside for moving costs, a family top-up, or by negotiating a reduced exchange deposit with the seller's solicitor. The seller isn't obliged to agree, so raise this with your solicitor early to avoid a last-minute problem.
Can I use 100% gifted money with no savings of my own?
Yes, most lenders accept a fully gifted deposit provided it's properly documented with a signed gifted deposit letter. Some lenders prefer to see at least some of your own savings alongside the gift, so check your lender's specific requirements before relying on this route entirely.
Does my deposit need to come from my own savings?
No. Lenders accept deposits from savings, gifted funds, investments, inheritance, redundancy payments and the sale of assets. The key requirement is that you can evidence where the money came from, as your solicitor will ask for a clear paper trail as part of anti-money laundering checks.
Can two first-time buyers combine their Lifetime ISAs on the same purchase?
Yes. If you're both first-time buyers with a Lifetime ISA, you can each use your own savings and bonus towards the same property, giving you up to £2,000 in combined annual government bonuses. Both buyers must be purchasing their first home and the property must be priced at no more than £450,000.