What is the minimum deposit for a mortgage in the UK?
The lowest deposit UK lenders will generally accept is 5% of the property’s purchase price. On a £250,000 home, that works out at £12,500. A fair few mainstream and specialist lenders run 95% LTV products, though the rate you pay will sit higher than it would with a bigger deposit behind you.
A 5% deposit is doable, but stretching to a bit more usually brings better rates and a wider set of lenders within reach.
How does deposit size affect your interest rate?
Lenders price mortgages in bands tied to your loan-to-value ratio, which is the size of your loan set against the value of the property. Every step down in LTV can drop the rate noticeably.
LTV tiers and what they mean
The sharpest rate drops usually land between 95% and 90% LTV, and again between 80% and 75%. A modest bump to your deposit can tip you into the next band and save thousands across the life of the mortgage.
If you are just short of an LTV threshold, say you have a 9% deposit, it is often worth the push to reach 10%. The better rate can save you far more over the years than that extra slice of deposit costs you now.
How to save for a deposit
Building a deposit takes time and a bit of discipline, but a few tactics can get you there quicker. Our mortgage deposit guide goes into them in more depth.
Lifetime ISA
- Government adds 25% to your savings (up to £1,000/year free)
- Save up to £4,000 per tax year
- Property must be £450,000 or less
Regular savings accounts
- Fixed monthly deposits build the habit
- Some accounts offer bonus rates for consistent saving
- Set up a standing order on payday so savings happen automatically
Cut costs and boost income
- Review subscriptions and direct debits
- Consider a side income or overtime
- Temporarily reduce discretionary spending and redirect to savings
Gifted deposits: using family money
Plenty of first-time buyers get a hand from family, the so-called “Bank of Mum and Dad.” Lenders are usually fine with a gifted deposit, as long as you follow a few rules.
What lenders require for gifted deposits
- A signed gift letter confirming the money is a gift, not a loan
- The letter must state that no repayment is expected and the giftor has no interest in the property
- Proof of the giftor’s identity (passport or driving licence)
- Evidence of where the gifted funds came from (bank statements showing the source)
Anti-money laundering (AML) checks
- Your solicitor will verify the source of the gifted funds
- The giftor may need to provide 3–6 months of bank statements
- Inherited money, savings, or property sale proceeds are commonly accepted sources
Who can gift a deposit?
- Most lenders accept gifts from immediate family: parents, grandparents, siblings
- Some lenders also accept gifts from extended family or close friends
- Gifts from non-family members may be scrutinised more closely
It must be a genuine gift
If a relative expects the money back, it is a loan rather than a gift. Leaving a loan undeclared can amount to mortgage fraud. So if there is any expectation of repayment, tell your broker and lender. Some lenders can work with a family loan, but they will count the repayments in your affordability.
What deposit sources do lenders accept?
Lenders have to check where your deposit came from. That is a legal requirement under anti-money laundering rules, not a bit of red tape they invented.
Accepted vs potentially problematic sources
| Generally accepted | May cause issues |
|---|---|
| Personal savings (with bank statement trail) | Cash savings with no bank statement trail |
| Gifted funds from family (with gift letter) | Cryptocurrency (some lenders accept, many don’t) |
| Inheritance (with probate documentation) | Gambling winnings (requires evidence of legitimate source) |
| Sale proceeds from another property | Overseas funds (additional checks and potential delays) |
| Redundancy payments | Loans (must be declared and factored into affordability) |
| Investments, ISAs, or pension lump sums | Recent large deposits with no clear explanation |
How long does it take to save a deposit?
It comes down to house prices where you are, how much you can put away each month, and whether anyone is helping. Here are some rough benchmarks.
Saving timeline examples (10% deposit)
These are simplified examples. Your real timeline will track your income, your outgoings, and local house prices. A mortgage broker can help you set a target that is realistic for you.
Builder deposits and new-build incentives
Some house builders dangle incentives at first-time buyers, from a contribution towards your deposit to paid stamp duty or free upgrades. They can be worth a lot, but they come with a catch or two.
Lenders often read a builder incentive as a cut in the price rather than a real deposit. If a builder offers a 5% “gifted deposit” on a £300,000 property, the lender may treat the home as worth £285,000, the “true” price, and work out your LTV from there.
Talk any builder incentive over with your broker before you commit, so you know how it will land on your mortgage application.
Get deposit advice from Clearview
At Clearview Mortgage Solutions we help first-time buyers at every stage, from working out how much deposit you need, to the LTV tier worth aiming for, to evidencing your funds for the lender.
Get in touch for a free, no-obligation chat about your deposit and your plans to buy.