How much deposit do I need for a mortgage?

Most lenders ask for at least 5% deposit. That said, it’s possible to get a deposit-free (or 100% mortgage) in certain circumstances - depending on your circumstances.

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The size of deposit you need depends on the type of buyer you are, the type of mortgage you're looking for, and your personal circumstances. But as a bare minimum, typical mortgage lenders are likely to ask for a 5% deposit.

That said, deposit-free mortgages are available, despite being relatively hard to come by.

Zero deposit mortgages

100% mortgages are not very common in today’s market, although there are a few products available that allow buyers to take out a mortgage without a deposit. The vast majority of these products are only available for those buyers who are assisted by parents or other family members, however.

There is one 0% deposit mortgage on the market aimed at renters, by Skipton Building Society. This product does not require any form of guarantee from a third party, so it’s great for those without wealthy parents. 

Skipton’s track record mortgage uses proof of 12 month’s worth of prompt rental payments as an indication of your ability to maintain mortgage repayments. There are other criteria to meet, so reach out to Mojo if you feel this may be a suitable product and we’ll run through the full details with you.

Family-assisted mortgages and guarantor mortgages

These are very similar mortgage products, both intended for those who struggle to raise a deposit and those on lower incomes, who struggle to meet mortgage affordability assessments. 

There are various types available from different lenders, and your mortgage adviser at Mojo can guide you through the options. If you’re looking at this type of mortgage, it may be best to speak to your parents, or whomever you are planning to ask for help with your mortgage ahead of time. 

An illustrative example is Barclays' Family Springboard mortgage, where your parents or relatives provide a 10% deposit, which is held as security for five years. The money accrues interest over 5 years and upon reaching a certain level of equity in your home, the deposit along with the interest earned can be retrieved by those providing it.

Why it’s best to save the largest deposit possible

While it can be frustrating to wait until you have a large deposit to buy your first home, there are some major benefits to doing so:

Cheaper rates: Mortgage lenders use a risk assessment to decide whether or not to lend to customers, and those posing the least risk typically benefit from the most competitive mortgage interest rates. A large deposit reduces the risk in lending to you by lowering your LTV (loan to value). Lower interest rates mean you’ll pay less interest over the duration of the mortgage.

Less chance of negative equity: property value changes all the time, so it’s perfectly possible to buy a home for, say £250,000 and it only be worth £245,000 in a few months time. If you’ve taken out a 100% mortgage, this would mean you’d end up in negative equity - which is where you owe more than your home’s current value. This can be problematic when you want to remortgage or move home.

5% Deposits (95% LTV mortgages)

Most banks are willing to lend up to 95% of the property's value without a guarantor. So it’s usually possible to get a mortgage with a 5% deposit. 

However, 95% LTV is still seen as higher-risk lending, and therefore you’ll usually also need a strong credit record and ample proof of income. 

It’s also important to consider that you’d get access to more competitive interest rates if you reduce your loan to value ratio with a larger deposit. 

25% Deposits (75% LTV mortgages)

25% is the average deposit size in the UK. This means that you’re investing in a quarter of the value of your property immediately. 75% LTV lending is considered much less risky, so you’ll likely get a much better interest rate than you would with a 5% or 10% deposit, for example.

Minimum buy-to-let deposit size

If you’re a landlord, or hoping to become one, 25% is also usually the minimum deposit size you’ll need to provide for a buy-to-let mortgage - which allows you to purchase rental properties.

Some lenders may require up to 40% deposit for investment property purchase, however, especially if you’re a portfolio landlord. However, it’s not unheard of to be offered 80% to 85% loan-to-value mortgages for buy-to-let properties.

This can help you to purchase investment properties sooner, however, keep in mind it will also push up the cost of the interest charged. 

If you are contemplating a mortgage application and have concerns about potential economic changes in the coming weeks, our team of Mojo experts is available to provide mortgage advice, guidance and assistance tailored to your specific situation.