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        A Complete Guide to Mortgage Deposits

        Trying to understand how much deposit you'll need for your next mortgage? Unsure how the process works? Find out all the answers in our in-depth guide!

        Firstly, where is your deposit likely to come from?

        No impact on your credit score

        Your mortgage deposit helps determine what rates and deals you’ll be offered and even whether your application will be accepted, so it’s important to fully understand what deposits are and how they work before you start your home buying journey.

        In this guide, you’ll learn everything you need to know, including how much you’ll need to save, where your deposit can come from and how a broker can help you.

        Read on for more information or jump to the section that’s relevant to you via the links below…

        What is a mortgage deposit?

        A deposit is a lump sum of money you pay upfront when you buy a property. It’s the amount you put down alongside your mortgage to make up the total purchase price.

        The size of your deposit can have a huge impact on the range and competitiveness of the mortgage deals you’re offered.

        Generally speaking, having a larger deposit will unlock more choice, better rates and increase your chances of having your application approved. That’s because lenders will view you as a less risky borrower if you’re investing more of your own money in the property purchase.

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        What is the minimum amount a lender will accept?

        You’ll typically need to put down at least 10%, but the exact amount will depend on the type of property you’re buying and your individual circumstances.

        For example, if you have a chequered credit history, your lender may demand a bigger deposit to balance out the risk of lending to you.

        Don’t be disheartened if you have less than 10% though as it’s still possible to get a mortgage with a very small deposit.

        A specialist broker can advise which lenders will consider your application and which are more likely to reject you.

        Mortgage deals for borrowers with no deposit at all – known as 100% mortgages – are incredibly rare these days.

        A small handful of lenders may offer them – but only in very specific circumstances – and rates on these mortgages tend to be very high.

        Loan-to-value (LTV) ratios explained

        You’ll hear lenders use the term loan-to-value (LTV) in relation to deposits. This simply refers to the percentage of your property that’s mortgaged, compared to the total value of the property.

        For example, a 100% LTV mortgage means you’re taking out a loan for the entire cost of the property with no deposit.

        Another example would be if you put down £15,000 on a £150,000 property, the deposit is 10% and the LTV is 90%.

        The LTV ratio will decline as you make capital repayments on your mortgage, and the lower it is, the more equity you hold in your property.

        How to work out your LTV

        You can use our calculator below to work out your own LTV on the property you’re looking to purchase.

        Remember to account for the deposit you have when inputting the amount you want to borrow.

        calculator icon

        LTV Calculator

        This calculator will tell you what your loan-to-value (LTV) ratio is, based on the property's value, your deposit/equity and the amount you're borrowing.


        Enter an amount in pound sterling
        £
        Property value minus your deposit/equity
        £
        Loan amount must be less than property value

        Your LTV is

        This means that most mortgage providers will consider your deposit amount to be more than satisfactory, but speaking to a broker is still recommended to ensure you get the best deal.

        This means you’re likely to meet the deposit requirements at most lenders, but since many reserve their best rates for those with higher deposits, speaking to a broker is recommended.

        Many mainstream mortgage providers would consider this high and be reluctant to lend. Applying through a mortgage broker may be necessary to find a specialist low deposit mortgage lender.

        LTVs have a direct impact on the rates available to you - speak to a mortgage broker and find out how to get the best deal based on your ratio.

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        Acceptable deposit sources

        Whether your deposit is big or small, your lender will always ask you for the source of the funds in order to adhere to strict anti-money laundering regulations.

        If you can’t prove where the money has come from or if it’s come from an unacceptable source, your application will almost certainly be declined.

        Always be honest on your application. Lenders and solicitors carry out thorough checks to confirm you’ve told the truth about the origins of your funds.

        Here’s a rundown of deposit sources accepted by the vast majority of lenders and the evidence you’ll need to provide:

        UK savings -

        Nearly all lenders will happily accept a deposit if it’s come from a personal savings account in the UK, although some may want to see proof of your balance increasing over time.

        You’ll need to provide evidence of the funds building up in your account, such as a recent bank statement.

        Inheritance -

        Most lenders are fine with money from an inheritance.

        You’ll need to provide legal paperwork proving the funds are yours as well as a bank statement showing the money in your account.

        Sale of another property -

        Proceeds from the sale of a property are routinely accepted by lenders, as long as you can prove they belong to you and another lender doesn’t have claim over them.

        You’ll need to provide a copy of the completion statement as well as a bank statement showing the funds in your account.

        Gifts -

        Lenders tend to be fine with gifted deposits as long as the gift is from a close family member such as a parent, grandparent or sibling.

        Some lenders will accept gifts from more distant relations, such as aunts and uncles, or close friends, but they tend to treat these cases as higher risk.

        You’ll need to provide written evidence of the value of the gift and confirmation that it doesn’t need to be repaid.

        Some lenders will also require proof the money has left the donor’s account and been paid into your account.

        Sale of assets -

        Most lenders will accept funds from the sale of assets such as artwork, boats, cars or expensive memorabilia.

        You’ll need to show proof of the sale and evidence of the funds in your account.

        The following is a list of deposit sources accepted by some lenders, but others might consider them ‘non-standard’ and view your application with caution…

        Gambling winnings -

        The proceeds of a big gambling win should be fine – although they won’t be universally accepted by all lenders.

        It’s also worth bearing in mind lenders could deem you high risk if you gamble regularly.

        You’ll need written proof of the gambling winnings and evidence that they’re in your bank account.

        If your winnings were in cash, you may struggle as it’s much harder to trace the origins of cash.

        Overseas savings -

        Most lenders will be hesitant to accept overseas deposits because it can be tricky to trace the origins of the funds, which makes it hard for them to meet anti-money laundering obligations.

        Some lenders will be more flexible, however. You’ll need to show proof of funds with recent bank statements.

        Unsecured borrowing -

        Using credit cards and personal loans to fund your deposit is usually a red flag for lenders.

        A small minority may consider you, but it will come down to your individual circumstances.

        Lenders will require proof of the loan contract and a copy of your bank statement showing the funds in your account.

        Cryptocurrency -

        While you can’t use cryptocurrency as a deposit, you can, in some cases, use the profits from it to fund your deposit.

        Many lenders will reject you outright if you’re going down this route but there are a handful who’ll consider your application.

        You’ll need verifiable proof of the acquisition and sale of the cryptocurrency to stand a chance of being accepted.

        If your deposit is coming from a non-standard source, it’s best to talk to a specialist broker who can advise which lenders will consider your application and which are more likely to reject you.

        How a broker can help you

        Whatever size deposit you have, a broker will be able to save you time and money as well as guide you through the application process.

        They’ll be able to help you gather the right paperwork for evidencing your deposit which will avoid any delays to your application.

        But crucially they’ll also be able to match you with the best lender for your circumstances, saving you money and time on wasted applications.

        If, for example, your deposit is coming from a non-standard source, they’ll be able to tell you which lenders to approach and which to avoid.

        Or if your deposit is on the small side, they’ll know which lenders are most likely to accept you and which will reject you straightaway.

        A broker will also be able to negotiate bespoke deals on your behalf thanks to their close relationships with lenders.

        They also get access to exclusive deals, can give you tailored advice and be on hand throughout the deal to make sure any issues are dealt with swiftly.

        Mortgage types and deposit requirements

        The amount you’ll need to put down as a deposit will depend on a range of factors such as the lender’s affordability criteria, your credit score and the price of the property. The type of property you’re buying will also make a difference.

        Here’s a summary of the deposit requirements for the most common mortgage types:

        Residential

        Most lenders will require a deposit of at least 10% for a standard repayment mortgage. That’s not to say you can’t get a mortgage with a smaller deposit. In fact, it’s possible to get a mortgage with a deposit of just 5%.

        But if you have a larger deposit, you’ll get access to better deals and increase your chances of having your application approved.

        If you’re considering an interest-only mortgage, you’ll probably have to put down a bigger lump sum. Most lenders will request a minimum 25% deposit although some will only require 20% and a few will allow just 15%.

        Buy to let

        For a buy-to-let mortgage, you’ll typically need to put down around 25% of the property value. Some lenders, however, will accept 20% and a few will consider 15% depending on your individual circumstances.

        Commercial

        Deposit requirements for commercial mortgages tend to be higher than for residential mortgages because lenders consider them riskier investments.

        Depending on the property type, you should expect to put down anything from 20% to 40% of the building’s value.

        If the building you’re buying is owner-occupied, such as a pub or office that you or your firm will be working out of, you’ll need a deposit of 20% to 30%.

        If you want a commercial investment mortgage for a building you’re planning to let out, you’ll need at least 25%.

        The deposit size for a commercial property will ultimately be based on lenders’ specific eligibility criteria.

        They’ll make their decision based on the company’s financials and your industry experience, among other things.

        Residential next to commercial

        If you’re planning to buy a flat above a commercial premises, you’ll need a deposit of at least 10%.

        If you’re buying the property as a buy to let investment, you should expect to put down at least 25% as lenders deem these mortgages higher risk.

        Second homes

        Most lenders will require a deposit of at least 25% if you’re looking to buy a second property.

        The higher deposit requirement is because you’ll be considered a riskier borrower if you already have a mortgage as your outgoings will already be high.

        Get matched with an expert mortgage broker

        Whether you’re saving for a deposit or you have the funds in place already, it’s never too early to talk to a mortgage broker.

        They’re best positioned to help you find the right deal for your circumstances, saving you time and maximising your money.

        The brokers we work with are experts when it comes to mortgage deposits, which means they can match you with the lender who is best placed to offer you a great deal based on the amount you have and your personal circumstances.

        They can help you prepare the paperwork you need to evidence your deposit funds, and if yours comes from a non-standard source, they will pair you with a lender whose criteria covers that.

        Give us a call on 0808 189 0463 or make an enquiry and get matched with a broker today for free.

        We hand-pick all the advisors in our network and rigorously vet them on your behalf so you can be assured you’re getting the best advice possible.

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        We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in mortgage deposits. Ask us a question and we'll get the best expert to help.

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        Pete Mugleston

        Pete Mugleston

        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!

        FCA Disclaimer

        *Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us as well as any of our own are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

        Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.