First-Time Buyer Deposit Requirements and How to Save More
This article outlines first-time buyer deposit requirements, how deposit size affects mortgage rates, and tips to save more, including government schemes.
05/01/2026By Pauzible Team · Editorial Team
Buying your first home can be one of the most exciting but also stressful times in your life. For many people, saving for a deposit is often the most challenging part. The average house price remains high, especially for younger buyers. Wages have not increased at the same pace as house prices for decades, and saving has become harder due to rising living costs.
Despite such challenges, people are still managing to get on to the property ladder. It is possible to buy your first home, but it takes careful planning and a clear understanding of what is required. The size of your deposit affects whether your mortgage application is successful and your mortgage rate and monthly mortgage payments.
What Is a Deposit and Why Does It Matter?
A deposit is the amount of money you pay upfront when buying a home. It is usually a percentage of the property’s purchase price. The remaining amount is borrowed from a bank or mortgage lender in the form of a mortgage loan.
The deposit demonstrates to the lender that you are financially committed. It reduces their risk, as you are investing your own money into the property. Consequently, lenders typically offer better deals to individuals who have saved a larger deposit.
If you wish to purchase a home for £250,000 and have saved for a deposit of £25,000, that amount would constitute a 10% deposit. You would need to borrow the remaining £225,000 by taking out a mortgage. If you have only saved £12,500, you would be making a 5% deposit and would need to borrow £237,500. This presents a higher risk for the lender, which often results in a higher interest rate.
How Much Deposit Do You Need?
Most mortgage lenders require a minimum deposit of 5% of the property's purchase price from first-time buyers. However, a larger deposit is usually recommended. If you can contribute 10% or more, you are more likely to secure better mortgage deals with lower interest rates.
The property's location plays a crucial role in determining the amount you need to save for a deposit. Generally, regions with higher property values demand a larger deposit, while areas with lower average home prices typically require a smaller initial investment. In pricier locations, such as busy cities and sought-after commuter towns, deposits can be significantly higher. In areas with more affordable housing, the deposit required may be far lower. As a result, buyers often compare different regions to find places where their savings will go further.
Saving a larger deposit not only helps secure mortgage approval but also lowers your monthly payments in the long run. A higher deposit means borrowing less, which reduces your loan-to-value ratio and opens the door to more affordable interest rates. Many buyers aim for a deposit of at least 15 to 20% to increase their chances of getting a good deal. The higher your deposit, the more attractive your mortgage application will look to lenders.
How Your Deposit Affects the Mortgage
The more money you save as a deposit, the less you will need to borrow from the lender. This influences every aspect of your mortgage.
Monthly Payments
Borrowing less results in lower monthly payments. A larger deposit leads to a smaller loan, reducing the interest and principal amount owed and making monthly bills more manageable.
Interest Rates
Mortgage lenders typically offer better interest rates to buyers with larger deposits. A person borrowing 95% of the home’s value will usually get a higher interest rate than someone borrowing 75%.
Mortgage Options
With a low deposit, you may only qualify for a limited number of mortgage products. With a larger deposit, you can potentially gain access to more competitive deals, longer fixed-rate periods and lower arrangement fees. It also makes you more appealing to lenders.
Application Approval
Lenders are cautious about lending large amounts of money to individuals who have not saved a significant amount. If you have a small deposit, your income and credit history are likely to be scrutinised more closely. With a larger deposit, lenders may be more willing to accept your application even if your income is not too high.
Different Types of Mortgage Products for First-Time Buyers
There are various types of mortgage products available. Your deposit helps to determine which ones are accessible to you.
Fixed-Rate Mortgages
These loans offer a fixed interest rate for a set number of years, guaranteeing that your monthly payments will stay the same despite changes in interest rates. Fixed terms usually last for two, five or ten years. Typically, the larger your deposit, the better your interest rate is likely to be.
Tracker Mortgages
Tracker mortgages follow the Bank of England’s base rate, plus a lender’s fixed percentage margin. If the base rate changes, your mortgage payments will also change. These can be cheaper than fixed-rate deals at first, but can become more expensive if the base rate increases.
Discount Mortgages
Some lenders offer a discount on their standard rate for the first few years of the loan. The actual cost can fluctuate, but it is lower than their usual rate. These mortgages often require a higher deposit to qualify.
95% Mortgages
Some lenders provide mortgages that require only a 5% deposit. However, these options generally come with higher interest rates and stricter conditions. You must possess a good credit score and strong evidence of your income and expenditure habits. Not everyone will qualify.
Government Help for First-Time Buyers
Certain government programmes are designed to assist first-time buyers trying to save money and enter the property market.
Lifetime ISA (LISA)
A Lifetime ISA (LISA) is a type of tax-efficient account that allows you to save up to £4,000 per year for your first home. The government adds a 25% bonus, up to £1,000 per year. The money can be used to purchase your first home, provided that the home costs £450,000 or less. You must be aged between 18 and 39 to open a LISA.
Shared Ownership
Shared ownership enables you to purchase a share of a property while renting the remainder. Typically, you can buy between 25% and 75% of the home. Subsequently, you can acquire additional shares. This reduces the deposit required, as you are initially only buying part of the property.
First Homes Scheme
This scheme provides homes at a discount of 30% to 50% for local first-time buyers and key workers. The properties must be new builds, and there are restrictions on income and property price. It is not available everywhere but is expanding in certain areas.
How to Save More for a Deposit
Saving for a deposit requires time, planning and sacrifice. Here are some ways to save more effectively.
Set a Target
Determine how much you need to save and when you intend to make a purchase. Break the goal into monthly amounts. Knowing the figure makes it easier to remain motivated.
Open a Lifetime ISA
If you qualify for a LISA, open one as soon as possible. The government bonus is one of the best ways to grow your deposit.
Reduce Spending
Look at your monthly spending. Cancel subscriptions you don’t use. Cut back on takeaways, nights out and shopping to the extent that you can. Put that money into your deposit fund.
Live with Family
If possible, think about moving in with family for a time. Living rent-free or paying reduced rent can assist you with saving more quickly.
Earn Extra Money
Some people take on freelance work or weekend jobs to boost their savings. Even a few hundred pounds a month can make a big difference, over time.
Conclusion
Buying your first home comes with challenges. House prices are high and saving for a deposit takes time and effort. But if you understand how the process works, you can put yourself in a better position. Your deposit influences more than just the amount of your mortgage. It also impacts your interest rate, your monthly payments and the likelihood of your mortgage being approved. The more you can save, the better your options will be. Utilise all available tools, from government support to savings plans. Plan ahead and stay focused. Homeownership may be challenging, but it is still attainable, especially if you take the necessary steps now.
FAQs
Q. What is a deposit?
A deposit is the amount of money you pay upfront when you buy a home. It demonstrates to the lender that you are serious and reduces the amount you need to borrow. Most lenders will not offer a mortgage unless you can put down a deposit of at least 5% of the home’s value.
Q. Can I get a mortgage with only a 5% deposit?
Yes, some lenders offer 95% mortgages, but they come with higher interest rates and stricter rules. You’ll need good credit and proof of steady income.
Q. Does a bigger deposit make a big difference?
A larger deposit means you borrow less, which reduces your monthly mortgage payments. It also helps you get lower interest rates and a better chance of mortgage approval.
Q. What is a Lifetime ISA and how does it help?
A Lifetime ISA allows you to save up to £4,000 each year and provides a 25% government bonus. You must use it to purchase your first home or save it until retirement.
Q. How long does it take to save for a deposit?
It depends on your income and expenditure. Living at home, budgeting and utilising available government schemes can help expedite the process.
About the author
Pauzible Team
Editorial Team
The Pauzible Team consists of finance professionals and property market specialists dedicated to reinventing home ownership and BTL financing. With deep expertise across UK real estate and innovative financial products like Equity Partnership Agreements, we provide landlords and homeowners with the insights they need to unlock equity, navigate market volatility, and build sustainable wealth through property. Our mission is to make complex property finance simpler, quicker, and more accessible for everyone.
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