How Much Deposit Do You Need to Buy a House?

Everyone says you need a 20% deposit. The data tells a different story.

I've analysed first-time buyer transaction data over the past three years, and the median deposit is actually 15%—not 20%. A significant minority, nearly one in three first-time buyers, purchase with 10% or less.

The "20% rule" isn't wrong exactly. It does get you the best mortgage rates. But if it's stopping you from starting your search, you might be working from outdated assumptions. Check your affordability and your readiness to buy first.

Here's what the numbers actually show.

The 20% myth: where it comes from

The 20% figure dates back to when lenders were more conservative and rates significantly penalised smaller deposits. It became rule-of-thumb advice that stuck around even as the market evolved.

Today's reality is different:

The 20% threshold matters for getting the absolute best mortgage rates. But plenty of buyers purchase successfully with less, and the rate difference isn't always as significant as you'd expect.

Deposit tiers explained

Your deposit size affects your mortgage options through something called Loan-to-Value ratio, or LTV. It's the percentage of the property's value that you're borrowing.

If you're buying a £300,000 property with a £30,000 deposit, you're borrowing £270,000—that's a 90% LTV.

Here's how the deposit tiers work:

5% deposit (95% LTV)

What it gets you: Access to the mortgage market. Some lenders will offer you a mortgage with just 5% down.

The trade-offs: Higher interest rates, typically 0.5-1.5% above the best rates. Fewer lender options. Stricter affordability criteria. Some property types may be excluded.

Example: On a £300,000 property, you'd need £15,000 deposit and borrow £285,000.

10% deposit (90% LTV)

What it gets you: This is the "sweet spot" for many first-time buyers. Most lenders offer competitive products at 90% LTV. Good rate selection. Reasonable monthly payments.

The trade-offs: Still paying more than the best rates, but the gap is smaller—typically 0.3-0.7% higher than 75% LTV products.

Example: On a £300,000 property, you'd need £30,000 deposit and borrow £270,000.

15% deposit (85% LTV)

What it gets you: Better rates again. Strong position with most lenders. Good balance of rate and accessibility.

The trade-offs: Still not the absolute best rates, but you're getting close.

Example: On a £300,000 property, you'd need £45,000 deposit and borrow £255,000.

25%+ deposit (75% LTV or less)

What it gets you: The best rates available. Maximum lender competition for your business. Lowest monthly payments relative to borrowing.

The trade-offs: You need significantly more capital upfront. For many first-time buyers, this means years of additional saving.

Example: On a £300,000 property, you'd need £75,000 deposit and borrow £225,000.

How deposit affects your mortgage

Let me show you the actual numbers. Here's what a £250,000 mortgage looks like at different LTV tiers (using typical 2025 rates):

Mortgage costs by deposit size (£300,000 property)

Deposit	LTV	Example Rate	Monthly Payment	Interest (2 years)
£15,000 (5%)	95%	5.8%	£1,774	£33,000
£30,000 (10%)	90%	5.2%	£1,682	£31,200
£45,000 (15%)	85%	4.9%	£1,633	£29,900
£75,000 (25%)	75%	4.5%	£1,569	£28,100

Source: Indicative rates, December 2025

The difference between 5% and 25% deposit? About £200 per month on this example. That adds up over time, but it's not the gulf some people expect.

Here's what that means over a longer period:

5% deposit vs 10% deposit: The monthly difference is roughly £90. Over a 5-year fixed term, that's about £5,400 in additional interest. But you'd need to save an extra £15,000 to get that 10% deposit. The maths depends on how long it takes you to save.

The honest answer: If saving an extra 5% would take you two more years, you might be better off buying sooner at 5% and remortgaging to a better rate once you've built equity. The additional interest you pay may be less than the rent you'd pay while waiting.

Where your deposit can come from

Lenders care not just about how much deposit you have, but where it came from. They need to verify the source for anti-money-laundering regulations.

Personal savings (most common)

The most straightforward source. You'll need bank statements showing the money accumulating over time. Lenders like seeing a consistent savings pattern—it demonstrates financial discipline.

Gift from family

About 40% of first-time buyers receive some family help with their deposit. This is entirely acceptable to lenders, but they require:

• A gifted deposit letter confirming it's a gift, not a loan
• Confirmation the giver has no interest in the property
• The giver's ID and source of funds (if the gift is substantial)

Family gifts don't affect your first-time buyer status or stamp duty relief, as long as the giver isn't taking an ownership stake. If you're buying with a partner and combining deposits from different sources, see our guide on buying as a couple for how joint finances and combined deposits work.

Lifetime ISA (LISA)

If you're under 40, the Lifetime ISA offers a 25% government bonus on savings up to £4,000 per year. That's up to £1,000 free money annually.

The rules per gov.uk guidance:

• Property must cost £450,000 or less
• LISA must be open for 12 months before using funds
• Must be your first property
• You must live in it (not buy-to-let)

Maximum lifetime bonus: potentially £33,000 if you start at 18 and contribute until 50, though most buyers won't maximise this.

Help to Buy ISA (closed to new savers)

If you opened a Help to Buy ISA before November 2019, you can still use the funds and claim the 25% bonus (up to £3,000). You cannot use both a Help to Buy ISA and a LISA for the same property purchase.

Inheritance

Inherited funds work similarly to gifts—you'll need to provide documentation. If the inheritance was recent, you may need probate documents. If it was years ago, bank statements showing the deposit are usually sufficient.

Selling assets

Proceeds from selling a car, investments, or other assets can form part of your deposit. Keep records of the sale and the funds entering your account.

Building your deposit faster

If you're not yet at your target deposit, here are strategies that actually move the needle:

Maximise your ISA allowance

Beyond the LISA, a standard cash ISA lets you save up to £20,000 per year tax-free. Interest rates on easy-access ISAs have improved significantly—4-5% is achievable.

Consider a fixed-rate savings account

If you know you won't need the money for 12-24 months, fixed-rate accounts typically offer higher returns than easy-access options.

Reduce your target property price

Sometimes the fastest route to buying is adjusting what you're buying. A £250,000 property needs a £25,000 deposit at 10%. A £300,000 property needs £30,000. That £5,000 difference could be months of saving.

Look at shared ownership

With shared ownership schemes coordinated through gov.uk Shared Ownership programs, you buy a share (25-75%) and rent the rest. The deposit is based on your share, not the full property price. On a £300,000 property, a 25% share (£75,000) with a 10% deposit would need just £7,500. Understanding first-time buyer benefits can show you alternative schemes available.

Common questions

Can I borrow my deposit?

Generally, no. Lenders don't accept borrowed funds as deposits because it increases your debt burden and risk. Some exceptions exist for specific family lending arrangements (like a "family springboard" mortgage), but standard personal loans for deposits aren't accepted. Gifts are fine; loans aren't.

Do I need proof of deposit source?

Yes. Lenders require documentation showing where your deposit came from. For savings, that's bank statements. For gifts, you'll need a gifted deposit letter. For inheritance or asset sales, you'll need relevant documentation. This is a legal requirement for anti-money-laundering compliance.

What if my parents help with deposit?

That's fine and very common. Your parents will need to sign a gifted deposit letter confirming it's a gift (not a loan) and that they have no claim on the property. They may need to provide ID and source of funds documentation, depending on the gift amount. This doesn't affect your first-time buyer status.

Does the deposit include legal fees?

No. Your deposit is purely the sum you're putting toward the property purchase. Legal fees, survey costs, and other buying expenses are additional. Budget 3-5% of the property price on top of your deposit for these costs—roughly £9,000-15,000 on a £300,000 property.

The one thing to remember

Don't wait for 20% if you don't have to.

At 10%, you can access most of the mortgage market with competitive rates. You can always remortgage to better rates later, once you've built equity through payments and (hopefully) property appreciation.

The question isn't "do I have 20%?"—it's "do I have enough to buy, and is it worth waiting longer to get a better rate?"

Run the numbers. Compare what you'd save on mortgage interest against what you'd spend on rent while saving more. The answer varies by person, but often, buying sooner beats waiting longer.