What is the minimum deposit for a mortgage in the UK?
The absolute minimum deposit accepted by UK mortgage lenders is 5% of the property’s purchase price. On a £250,000 home, that’s £12,500. Several mainstream and specialist lenders offer 95% LTV products, though your rate will be higher than if you had a larger deposit.
While 5% is technically possible, many buyers find that saving a little more opens up significantly better rates and more lender options.
How does deposit size affect your interest rate?
Lenders price their mortgages in bands based on loan-to-value ratio. Each step down in LTV can unlock a noticeably lower rate.
LTV tiers and what they mean
The biggest rate jumps typically happen between 95% and 90% LTV, and again between 80% and 75%. Even a small increase in your deposit can move you into the next tier and save thousands over the mortgage term.
If you’re close to an LTV threshold (e.g. you have a 9% deposit), it’s often worth the extra effort to reach 10%. The rate improvement can save far more than the additional deposit amount over the life of the mortgage.
How to save for a deposit
Saving a deposit takes time and discipline, but there are strategies that can help you get there faster.
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
Many first-time buyers receive help from family members, often called the “Bank of Mum and Dad.” Lenders are generally happy to accept gifted deposits, but there are rules you need to follow.
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 family member expects repayment, it’s a loan, not a gift. Undeclared loans can lead to mortgage fraud. If there’s any expectation of repayment, declare it to your broker and lender — some lenders can accommodate loans from family, but they’ll factor the repayments into your affordability.
What deposit sources do lenders accept?
Lenders need to verify where your deposit comes from. This is a legal requirement under anti-money laundering regulations, not a lender quirk.
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?
This depends on property prices in your area, your savings rate, and whether you receive any help. Here are some rough benchmarks.
Saving timeline examples (10% deposit)
These are simplified examples — your actual timeline depends on your income, expenses, and local property prices. A mortgage broker can help you set a realistic target based on your current situation.
Builder deposits and new-build incentives
Some house builders offer incentives to first-time buyers, including contributions towards your deposit, paid stamp duty, or free upgrades. These can be valuable but come with caveats.
Lenders may treat builder incentives as a price reduction rather than a genuine deposit contribution. If a builder offers a 5% “gifted deposit” on a £300,000 property, the lender may value the home at £285,000 (the “true” price) and calculate your LTV accordingly.
Always discuss builder incentives with your broker before committing, so you understand how they’ll affect your mortgage application.
Get deposit advice from Clearview
At Clearview Mortgage Solutions, we help first-time buyers at every stage — including working out how much deposit you need, which LTV tier to target, and how to evidence your funds for the lender.
Contact us for a free, no-obligation chat about your deposit and buying plans.