Mortgage Deposits: How Much You Need & How To Prove It
Trying to understand how far your deposit will go, or how to show proof of it? Find out all the answers and more in our expert guide!
Firstly, where is your deposit likely to come from?
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Author: Pete Mugleston - Mortgage Expert, MD
Updated: March 21, 2022
If you’re hoping to get a mortgage, you might be wondering how much of a deposit you’ll need, and thinking about how you’re going to get the funds together.
In this article we’ll look at the size of deposit you’re likely to need, and the evidence your mortgage lender might ask for to prove where your funds came from.
The following topics are covered below...
How much deposit do you need for a house?
Most mortgage lenders will ask you for at least 10% of the property’s price as a deposit, but it’s possible to get approved with as little as 5% under the right circumstances.
When the risk is perceived to be higher, lenders tend to ask for more than 10% deposit.
This table shows how much you’d need to save for a 5%, 10%, 15% or 20% deposit at a range of purchase prices:
|How much deposit do I need for a £150,000 house?||How much deposit do I need for a £275,000 house? (recent UK average house price)||How much deposit do I need for a £300,000 house?|
|15% (average deposit for a first-time buyer)||£22500||£41250||£45,000|
As a general rule, the more you can save for a deposit, the more favourable interest rates you’ll access. But the size of deposit you’ll need depends on your circumstances, the property you’re buying, and the monthly repayment you can afford.
For example, if you were applying for a £100,000 mortgage, you would typically need a deposit of £10,000 (10%), but if you had bad credit, the lender might ask you to put down £20,000 (20%) to offset the risk they’d be taking on by letting you borrow money.
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Minimum deposit for a mortgage
Until recently, the minimum deposit for a residential mortgage was usually 10% of the purchase price. But there are lenders who will offer mortgages with a small deposit, like 5% – particularly since the introduction of the mortgage guarantee scheme in April 2021.
The minimum deposit is higher for buy-to-let mortgages. You’ll usually need a deposit of 20-25% of the property’s value, although some lenders set the minimum as high as 40%.
Is it possible to get a mortgage with a nil deposit?
There are a very small number of lenders prepared to offer 100% mortgages where no deposit is needed.
This is usually in one of these circumstances:
- Someone else (usually a parent) guarantees to cover the repayments on the mortgage if you can’t – this is called a guarantor mortgage.
- Someone (again, usually a parent or another close family member) secures the mortgage for you, either by putting a percentage of the loan value into a specific savings account, or by securing the mortgage against some of the value of their own property. This is called a family assist mortgage.
- You’re planning to buy a house through the Right to Buy scheme – in this case you may be able to use the discount offered by the scheme to cover the deposit.
If you don’t think you can save enough for a deposit, another option might be Shared Ownership. Under this scheme, you take out a mortgage on between 25-75% of the property price, then pay a reduced rent on the rest.
You can buy some or all of the remaining share of the property if and when you can afford to.
How a broker can help
The mortgage types listed above are all quite specialist, so not every lender will offer them. (For example, mortgages on Right To Buy properties may only be offered by a lender local to the relevant local authority area.)
That’s where an expert broker comes in.
Whether you’re looking for a nil deposit mortgage or hoping to get a competitive interest rate by paying a larger deposit, the right broker can help you identify the lenders who can help.
And finding the right broker is easy with our free matching service.
Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and the mortgage advisor best placed to help you.
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Proof of deposit for a mortgage
When you apply for a mortgage, you’ll need to show evidence of where you got your deposit from.
Mortgage lenders need this to make sure they’re complying with laws against money laundering. It also helps them confirm that you can afford the mortgage you’re applying for.
Mortgage lenders each have their own rules about the deposit sources they’ll accept and the proof they need.
This is the most common source of mortgage deposits.
Most lenders will want to see bank statements going back at least six months, so they can see the savings building up in your account over time. If you have more than one savings account you’ll need to provide statements for each of them.
Selling property or other assets
A lump sum from the sale of a previous property, or another asset such as a car or boat, is a perfectly acceptable source of deposit funds for most lenders.
You’ll just need to provide ownership documents for the asset that was sold, a bank statement showing the money being received, and – if it was a property that was sold – probably a completion statement as well.
Capital from another property
If you are releasing equity from one property to fund the deposit for a second one – and both mortgages are with the same lender – then the lender will already have the necessary evidence of the first property, so you shouldn’t need to provide any additional documentation.
You’ll need a bank statement showing the amount being transferred into your account, and a certificate from the executors of the will.
If some or all of your deposit funds were a gift from a parent or another close relative, your mortgage lender may require a legal document as evidence that this was a gift; that you’re not expected to pay it back; and that whoever gave you the money will have no rights over the property.
Lenders may be less willing to accept deposits given as gifts by anyone other than a close relative: see below.
Deposit sources which might not be accepted
Many mortgage lenders will be uncomfortable with:
- Cash deposits. If your bank statement shows a large amount of cash coming into your account all at once and it’s not from one of the sources listed above, lenders will need to see evidence of where it came from, so they can be sure it’s not connected with fraud or other criminal activity.
- Gifted deposits not from close family members. If your deposit was from a more distant relative, a friend or an employer, it might raise concerns about money laundering.
- Savings held overseas. Again, this can make it harder for lenders to do their anti-money-laundering checks.
- Gambling winnings. If these are simply shown as cash deposits into your bank account, it can be difficult to provide evidence of where the funds came from. And if you gamble regularly, some lenders may see you as a risk.
- Personal loans. Borrowing money using a loan as a deposit is a no-no for many lenders, as it might indicate that you can’t afford a mortgage.
But there are lenders out there who may consider some or all of these deposit sources, depending on your circumstances.
If the source of your deposit is on this list, let us know when you get in touch with us. We can find you a broker with the right expertise to help.
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Finding the right lender for your deposit size
If you’re trying to buy a property with a small deposit or no deposit at all, your options will be limited when it comes to choosing lenders.
Only a few lenders offer mortgages through the mortgage guarantee scheme, and those that do offer it will require certain conditions.
For example, Santander won’t lend to self-employed people under the mortgage guarantee scheme; and many lenders won’t let you use the scheme to purchase new build properties.
On the other hand, if you have a larger deposit, you’ll be able to access more competitive interest rates.
Find the right broker for your deposit
Our personalised matching service will find you the right broker for your circumstances.
We work with brokers with a wide variety of experience and specialisms, including support with providing proof of your deposit.
Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and your ideal mortgage broker today.
Get Started with a Broker
Maximise your chance of approval with specialist advice from a mortgage expert.
Possibly – but you’ll definitely need to show them proof of funds, which is something different.
A proof of deposit proves where your funds came from. A proof of funds is just evidence that you have the money to buy the property.
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Mortgage Expert, MD
About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!