A mortgage deposit is the money you need up front when buying a home. It’s your share of the property from day one, and it shapes almost everything else: how much you can borrow, the interest rate you’re offered, and how comfortable your monthly payments feel.
If you’re trying to understand what a deposit actually does, how big it needs to be, and what changes when you save a bit more, this guide walks through it in plain English.
What a Mortgage Deposit Actually Is
A mortgage deposit is the portion of the property you pay for with your own money.
- Buy a £300,000 home with a £30,000 deposit → 10% deposit
- The remaining £270,000 is the mortgage → 90% loan-to-value (LTV)
The LTV ratio is what lenders use to price risk.
Lower LTV = lower risk → better interest rates.
How Your Deposit Affects the Mortgage
1. Bigger Deposit = Better Rates
Lenders price mortgages in brackets: 95%, 90%, 85%, 80%, 75%, 60% LTV.
Dropping into a lower bracket usually unlocks a noticeably cheaper rate.
Sometimes the difference between 90% and 85% LTV is thousands over the fixed term.
2. Bigger Deposit = Lower Monthly Payments
A smaller mortgage means lower monthly repayments.
This can also boost your affordability assessment.
3. Bigger Deposit = More Lenders Will Consider You
Some lenders won’t offer 95% mortgages in tight markets.
A stronger deposit gives you more choice and better flexibility.
How Much Deposit You Actually Need
There isn’t one magic number. It depends on your timeline, income, and comfort with monthly payments.
But here’s a grounded view of the landscape:
5% Deposit (95% LTV)
- Minimum most lenders require
- Rates are higher
- Best for people who want to buy sooner and accept the cost trade-off
10% Deposit (90% LTV)
- Noticeably better rates
- Wider choice of lenders
- A solid starting point if you can manage it
15%–20% Deposit (85–80% LTV)
- Strong affordability position
- Lower rates and more stable payments
- Often the “sweet spot” for many buyers
25%+ Deposit (75% LTV and below)
- Access to some of the lowest rates available
- Useful for movers with built-up equity or buyers with gifted deposits
What Changes When You Add a Little More to Your Deposit?
A common misconception:
“Saving an extra 1–2% won’t matter.”
It often does! Small increases can move you into the next LTV band. That single step can reduce your interest rate, monthly payments, and overall cost far more than the extra savings itself.
Example:
Saving £5,000 more could unlock a better rate that saves £4,000–£8,000 in interest during a five-year fix.
Where Deposit Money Usually Comes From
Most buyers build deposits through a mix of:
- Regular savings
- Lifetime ISA (with 25% government bonus)
- Equity from a previous home
- Family gifts
- Reducing debts to improve affordability
- Extra income or side work
- Saving with a partner
(If you want a full guide on how to build a deposit, we have that as a separate post.)
Do You Need a “Big” Deposit to Get a Mortgage?
No, but a bigger deposit is almost always cheaper in the long run.
The real question is balance: Are the time and effort required to save more worth the interest you’ll save later?
A mortgage adviser can model this for you.
Sometimes waiting pays off. Sometimes getting on the ladder sooner is the smarter move.
Final Thoughts
A deposit isn’t just cash in an account. It’s leverage. It affects your interest rate, your borrowing power, your monthly payments, and how much flexibility you have when choosing a lender.
There’s no perfect number.
Just the number that gets you closer to the home that fits your life.
Reflect:
If saving a little more could move you into a cheaper LTV band, would the wait be worth it for you?