How much deposit do you need?
What you'll learn
Understand how much deposit and income you really need to buy a home.
You can buy with a deposit as small as 5% of the price, using a 95% mortgage. But a bigger deposit does two useful things: it shrinks the loan you need, and it unlocks cheaper interest rates.
Lenders price mortgages in loan-to-value (LTV) bands. Cross below a boundary and the whole loan reprices to a cheaper rate.
| Deposit | Loan-to-value | Effect on your rate |
|---|---|---|
| 5% | 95% | Highest rates |
| 10% | 90% | Cheaper |
| 25% | 75% | Among the cheapest |
There is a second wall most people miss. Your deposit decides when you can buy. Your income decides what you can buy. UK lenders rarely lend more than around 4.5 times your income, under a Bank of England rule, so earnings cap your borrowing no matter how big the deposit.
That is why two people with the same £30,000 deposit can afford very different homes if their incomes differ. Save the deposit, but check the income wall early, because it is usually the one that binds first.
Key takeaways
- The practical minimum deposit is about 5%, but more unlocks cheaper rates.
- Lenders price in LTV bands; dropping below 90%, 80% or 75% reprices the whole loan.
- Income caps borrowing at roughly 4.5 times earnings, whatever your deposit.
- Your deposit decides when you can buy; your income decides what you can buy.
Based on a 4.5 times income multiple, the Bank of England anchor. A guide only - check current lender criteria, which vary.
Frequently asked questions
What is the smallest deposit I can buy with?
Typically 5%, using a 95% mortgage. A few 100% (no-deposit) deals exist but are rare and come with strict conditions. A bigger deposit gets you cheaper rates.
Does a bigger deposit get me a cheaper rate?
Yes. Lenders price in loan-to-value bands, so dropping below a boundary such as 90%, 80% or 75% reprices the whole loan to a lower rate, not just the part above the line.
Why won't the bank lend me more even with a big deposit?
UK lenders rarely lend more than around 4.5 times your income, under a Bank of England rule. So your income caps the loan regardless of how large your deposit is.
General information, not financial advice. The value of investments can fall as well as rise, and figures and rules can change; check the current position before acting.