Ask most people how much deposit you need to buy your first home and they’ll probably tell you 5%.
But that isn’t always true.
While a 5% deposit remains one of the most common ways to buy a property, today’s mortgage market offers more options than many first-time buyers realise. Depending on your circumstances, it may even be possible to buy with a much smaller deposit, or in some cases, no deposit at all.
The key isn’t simply how much you’ve saved. It’s understanding which lenders are willing to consider your circumstances and which mortgage products are available to you.
Do You Actually Need A Deposit?
Not always.
Although most mortgage products require some contribution from the buyer, there are now lenders offering:
- 100% mortgages, meaning no deposit is required.
- 99% mortgages, requiring a 1% deposit.
- 98% mortgages, requiring a 2% deposit.
- 97% mortgages, requiring a 3% deposit.
- 95% mortgages, requiring a 5% deposit.
These products are designed to help buyers who have demonstrated they can comfortably afford mortgage repayments but haven’t yet been able to build a significant deposit.
They’re not suitable for everyone, and eligibility criteria can be more restrictive, but they demonstrate that the traditional “you need at least 5%” rule is no longer always accurate.
What Difference Does Your Deposit Make?
Your deposit determines your Loan to Value (LTV).
Loan to Value is simply the percentage of the property’s value you’re borrowing.
For example:
Generally, the lower the Loan to Value, the lower the lender’s risk.
As your deposit increases, you may benefit from:
- More mortgage products.
- More competitive interest rates.
- Lower monthly repayments.
- Greater flexibility when choosing a lender.
However, that doesn’t automatically mean waiting until you’ve saved a larger deposit is always the best financial decision.
Should You Wait and Save More?
This is one of the biggest questions first-time buyers face.
Waiting another year or two may allow you to save a larger deposit, but property prices may also increase during that time. Mortgage rates could change, your income may improve, or you may simply decide you’d rather own a home sooner.
Every buyer’s circumstances are different.
Sometimes purchasing with a smaller deposit makes perfect sense. In other situations, waiting a little longer can improve the range of mortgages available and reduce your borrowing costs over the long term.
The right decision depends on your wider financial position, not just the size of your savings.
Your Deposit Isn’t The Only Thing Lenders Look At
Many first-time buyers focus almost entirely on the deposit, but lenders assess much more than that.
They’ll also consider:
- Your income.
- Employment status.
- Credit history.
- Existing financial commitments.
- Monthly affordability.
- The type of property you’re purchasing.
This means someone with a relatively small deposit but a strong, stable income may have access to better mortgage options than someone with a larger deposit but weaker affordability.
It’s about your overall financial profile rather than one individual number.
Where Can Your Deposit Come From?
Not every deposit has to come from years of personal savings.
Lenders will often accept deposits from a variety of sources, including:
- Personal savings.
- A gifted deposit from parents or close family members.
- An inheritance.
- Proceeds from investments.
- Savings built through a Lifetime ISA.
- Certain employer or government-backed schemes.
Each lender has different requirements regarding acceptable deposit sources, so it’s important to discuss this early in the process.
Don’t Forget The Additional Costs
Your deposit is only one part of buying your first home.
You’ll also need to budget for:
- Solicitors’ fees.
- Surveys and valuations.
- Mortgage arrangement fees, where applicable.
- Home insurance.
- Removal costs.
- Furniture and decorating.
Keeping some savings aside after completion can provide valuable peace of mind as you settle into your new home.
Expert Advice Can Make All The Difference
The mortgage market has evolved significantly in recent years.
With products now available at 100%, 99%, 98%, 97% and 95% Loan to Value, many buyers have more options than they realise. Equally, not every lender offers these products, and eligibility can vary considerably.
At Henry Dannell, we help first-time buyers understand what’s genuinely achievable based on their individual circumstances. Rather than assuming a particular deposit is required, we assess your overall financial position, explain the options available and identify lenders whose criteria best match your needs.
If you’re wondering whether you’ve saved enough to buy your first home, the answer may be more encouraging than you think.
A mortgage is secured against your property. Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured against it. Mortgage availability and lending criteria are subject to individual circumstances and status.
