Mortgage Deposits

Mortgage Deposits

One of the most common questions asked by prospective property buyers, whether this be for their own personal use or as a buy to let, is how much deposit do I need to buy a house? Of course, it may not actually be a house you are looking to purchase but the general question remains the same and as with much in this industry the answer is not always straight forward. Much can depend on your own circumstances and it can also be influenced by the type of property you are buying.

To help guide you through the various options we’ve detailed a few handy pieces of information below. Of course, we cannot cover every eventuality so if you’re still unsure after reading the below please give us a call and one of our experienced advisers will be very happy to discuss your specific situation and advise you how much deposit you may require.

No deposit mortgage

 Pre-credit crunch the mortgage market was awash with 100% mortgage schemes. Without these being available many current homeowners would not be living in their own homes. Post credit crunch mortgage providers have taken a tougher approach with their lending practices and in the current market, whilst 100% mortgages are still available, they are specific specialised schemes with rigid criteria attached. As such they are limited in their suitability and very few applicants find themselves being able to proceed down this route.

One type of purchase that can benefit from lenders not requiring a personal deposit is for a Right to Buy mortgage. Many lenders will accept the discount as the deposit that in turn can make some of the best interest rates on the market available.

5 percent mortgage

 Having a 5 percent deposit and in turn looking for a 95% loan to value mortgage is the minimum starting point for most. Even now however the options are limited but, with government-backed low deposit mortgage schemes and greater lender participation, obtaining a 5% deposit mortgage is much more obtainable than it has been for many years.

10 percent mortgage

 Reaching a 10 percent deposit starts to open up many more options in the mortgage market as this is the level that virtually all lenders will start to offer mortgages. Certain limitations could still apply, especially when looking to purchase a new build property or if you have a history of bad credit. Larger deposits could still be needed in such circumstances by some lenders.

15 percent mortgage

 Whilst having a 10 percent deposit is the key to open most mortgage doors, by having a 15 percent deposit and in turn needing an 85% loan to value mortgage will provide even further choice. This level of deposit could even be the starting point if you have a history of bad credit and could also be the minimum required by some lenders if you are looking to purchase a new build house.

25 percent mortgage

If you are in the position of having a 25% house deposit you should likely now find that you will have a great level of choice for your options and indeed have access to some of the most competitive interest rates on the market. Whilst some lenders will drop their rates further for those that have 40% or even 50% deposits, the lowest for many will be offered at 75% loan to value. A 25% deposit may also be the minimum requirement for many lenders if you are considering a new build flat or apartment.

Minimum deposit for a buy to let

The above gives an overview for the deposit requirements should the property be for your own personal use however, the rules are slightly different if you are buying the property to rent it out.  Typically the minimum deposit for a buy to let mortgage will be 20% however in certain times you may find this to be as little as 15%. Whilst 20% is the usual minimum, not all lenders will consider this and for many the minimum is still regarded as a 25 percent deposit. Other factors such as your status i.e., a first-time landlord or an experienced portfolio customer can also have an influence over the sized deposit you may need.

Whilst there is no average UK house deposit the above will hopefully give you an indication of what may be applicable for you however, as touched on earlier, the mortgage industry can be quite complex even when it comes to how much you need for a house deposit so always seek advice on what is applicable to your own personal circumstances.


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Carl Shave

CEO and co-founder

About the author

Carl Shave has been involved in the mortgage & finance industry since leaving education and is one of the co-founders of Just Mortgage Brokers. He has written guest posts and provided journalist comments for companies such as The Times, FT Adviser, Mortgage Strategy, Mortgage Solutions and others, demonstrating his extensive industry knowledge.