The Minimum Deposit for a Mortgage
Most lenders require a minimum deposit of 5% of the property's purchase price. So if you're buying a home worth £250,000, you'd need at least £12,500.
However, while 5% deposit mortgages exist, putting down more will almost always get you a better interest rate. The mortgage market works on loan-to-value (LTV) bands, and rates improve significantly as your deposit increases.
How LTV Bands Work
Loan-to-value is the percentage of the property's value that you're borrowing. The lower your LTV, the less risk for the lender, and the better your rate:
- 95% LTV (5% deposit) — available but rates are higher
- 90% LTV (10% deposit) — a noticeable improvement in rates
- 85% LTV (15% deposit) — access to more competitive deals
- 75% LTV (25% deposit) — typically where the best rates start
- 60% LTV (40% deposit) — the very best rates on the market
Each band represents a step down in rates, so even a small increase in your deposit can make a meaningful difference to your monthly payments.
Does This Apply to Remortgaging?
Yes — when you remortgage, your equity acts as your deposit. If your home has increased in value since you bought it, or you've paid down a significant chunk of your mortgage, your LTV could be much lower than when you first bought.
This means you may qualify for better rates than you had before, even if your financial circumstances haven't changed dramatically. It's one of the most common reasons people save money by remortgaging.
Tips for Building a Bigger Deposit
If you're saving for a first-time purchase, every extra pound in your deposit pot helps. Consider using a Lifetime ISA for the 25% government bonus on savings up to £4,000 per year. Regular savings accounts, help from family through gifted deposits, and cutting back on non-essential spending can all accelerate your progress.
If you're an existing homeowner, focus on how much equity you have. Home improvements that add value, combined with natural house price growth, can push you into a better LTV band when it's time to remortgage.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.