Intermediaries Accessibility tools
Branches Contact Open an account
Mortgage deposits explained
Family In Living Room Playing With Cars

Buying a house is one of the biggest things you’ll ever do. It’s exciting, but let’s be honest - it can also feel a bit scary. There’s a lot of jargon to get your head around, and the money side of things is often the most confusing part. We’re here to make it simple.

First-time buyer deposit

If you’re looking to buy your first home, you’ve probably heard the word ‘deposit’ more times than you can count. You know you need one. You know it involves saving a lot of cash. But what does it actually mean? How much do you really need? And does it make a difference if you save 5% or 10%?

What is a mortgage deposit?

Think of a mortgage deposit as your first payment towards your new home. It’s a lump sum of money that you pay upfront.

Banks and building societies (like us) usually won’t lend you the full price of a house. Instead, the deal works like this:

  1. You pay a percentage of the price yourself (the deposit).
  2. You borrow the rest from a lender (the mortgage).

For example:

  • You want to buy a house that costs £200,000.
  • You save a 10% deposit of £20,000.
  • You borrow the remaining 90% (£180,000) as a mortgage.

That percentage you borrow is often called the ‘loan to value’, or LTV for short. In this example, your LTV is 90%.

Loan to value explained

We mentioned LTV earlier, but it’s worth explaining properly because it’s a term you’ll see on every mortgage product.

LTV is simply the loan amount compared to the value of the property.

  • 95% LTV: You have a 5% deposit.
  • 90% LTV: You have a 10% deposit.
  • 85% LTV: You have a 15% deposit.
  • 80% LTV: You have a 20% deposit.

As you move down that list and your deposit gets bigger, the mortgage deals tend to get cheaper. Lenders often have "bands" for their interest rates. You might find that the interest rate drops significantly when you hit 10%, and then drops again at 25% or 40%.

Deposits for first-time buyers

Saving for a deposit is the biggest hurdle for most first-time buyers. House prices have gone up over the years, and that means the amount you need to save has gone up too.

The good news is that you don’t always need a huge amount to get started.

How much deposit do I need?

Most lenders ask for at least 5% of the property’s value. This is often called a ‘95% mortgage’.
If you are buying a home for £200,000, a 5% deposit would be £10,000. That is still a lot of money, but it is much more achievable than the 20% or 30% deposits that people often think they need.

However, while a 5% deposit gets your foot in the door, saving a bigger deposit has some big benefits:

  • Lower monthly payments: if you put down a bigger deposit, you borrow less money. That means your monthly mortgage repayments will be smaller.
  • Better interest rates: lenders usually offer their best deals to people with larger deposits. A mortgage with a 60% LTV (where you have a 40% deposit) will usually have a much lower interest rate than a mortgage with a 95% LTV.
  • Less risk of negative equity: ‘negative equity’ sounds scary, but it just means owing more on your mortgage than your house is worth. This can happen if house prices fall. If you have a bigger deposit, you own more of your home straight away, so you have a bigger safety buffer.

Ways to boost your deposit savings

Saving tens of thousands of pounds takes time. It can feel like a mountain to climb. But there are smart ways to get there faster.

The Lifetime ISA

If you are aged 18–39, a Lifetime ISA (LISA) could be a game-changer for your deposit.
A LISA is a savings account designed specifically to help people buy their first home (or save for later life).

Here is how it works:

  • You can save up to £4,000 each tax year into a LISA.
  • The government adds a 25% bonus to your savings.
  • That means if you save the full £4,000, you get an extra £1,000.

That is £1,000 of free cash every year you max out the account. If you and a partner are buying together, you can both open a LISA and both get the bonus. That’s up to £2,000 in bonuses towards your deposit every year.

You can use the money (and the bonus) towards a deposit for your first home as long as:

  • The property costs £450,000 or less.
  • You are buying with a mortgage.
  • You have had the LISA open for at least 12 months.

It’s worth noting that if you withdraw the money for any reason other than buying your first home or retirement (after age 60), you’ll pay a 25% withdrawal charge. This recovers the government bonus and takes a small chunk of your own money too, so you need to be sure you’re going to use it for a home.

Open a Lifetime ISA today

The Lifetime ISA is available to UK residents aged between 18-39 who are purchasing their first home or saving for retirement. If eligible, you can open an account online today with just £1.

If you withdraw money for any reason other than buying your first home or retirement, you'll pay a 25% Government penalty, so you may get back less than what you paid in.

Open a Lifetime ISA today
Colleague Showing Nottingham App
Open a Lifetime ISA today

Buying a property to let?

So far, we’ve talked about buying a home to live in. But if you want to buy a house to rent out to others, the rules change.

For a buy-to-let mortgage, lenders view the risk differently. Because you aren’t living there, it’s seen as a business investment. If the property is empty for a few months, you still need to pay the mortgage, which adds risk.

Because of this, you will typically need usually a bigger deposit for a buy-to-let property.

  • Minimum deposit: Usually 25% of the property value.
  • Interest rates: Often higher than residential mortgages.

You’ll also need to think about extra costs like higher Stamp Duty rates for second homes (if you already own one).

Where can your deposit come from?

Lenders need to know where your deposit money comes from. This is part of our legal responsibility to prevent money laundering. We aren’t being nosy - we just have to check!
Here are the most common sources we accept:

  1. Your own savings
    This is the most standard source. You’ve earned the money from your job and saved it up over time. We might ask to see bank statements to show the savings building up.

  2. Gifted deposits
    Lots of first-time buyers get help from family. This is known as a ‘gifted deposit’. It is absolutely fine to do this, but there are a few rules:
    • It must be a gift, not a loan.
    • The person giving you the money (like a parent or grandparent) usually has to sign a letter confirming they don’t want the money back.
    • They also have to confirm they won’t own any part of the house or have the right to live there.

  3. Inheritance
    If you have inherited money, you can use this for your deposit. You will usually need a letter from the solicitor who handled the estate to prove where the money came from.

What usually aren't accepted?

Personal loans

Most lenders won’t accept a deposit that comes from a personal loan.

Why? Because borrowing your deposit means you have two debts to pay back every month: the mortgage and the loan. This puts a lot of pressure on your finances and makes it more likely that you might struggle to pay.

Credit cards

Using cash advances from credit cards is also a no-go for the same reason. It adds to your debt and suggests you haven’t been able to save up the money yourself.

Deposit payment timeline: When do you pay?

One of the biggest questions that gets asked is: "When does the money actually leave my bank account?"

It doesn’t happen the day you make an offer. Here is the typical timeline:

  1. Agreement in principle: You let your lender know how much deposit you have, but you keep the money in your account.
  2. Mortgage application: You show the lender proof of the deposit (bank statements), but the money stays with you.
  3. Exchange of contracts: This is when things get official and the sale becomes legally binding. It’s the point where you can finally breathe a sigh of relief (and maybe start packing those boxes in earnest).
    • The deposit: Your solicitor will usually ask you to have your deposit funds ready in their account before this date.
      It’s worth noting that every firm works slightly differently! It really comes down to the individual solicitor. Some will take the deposit right at exchange, while others prefer to handle it on completion day.
    • The result: Once those contracts are swapped, you’re locked in, and your solicitor will handle the hand-off of funds to the seller’s team based on their specific process.
  4. Completion: This is moving day. The rest of the money (the mortgage from the lender) is transferred, and you get the keys.

So, you need your deposit money ready and accessible before you exchange contracts. If your money is locked away in a fixed-term savings bond, make sure it matures in time!

Check what you can afford

Knowing you need a deposit is one thing. Knowing what that deposit buys you is another.
Not sure how your £15,000 savings translates into a house price? We can help you crunch the numbers.

Our deposit calculator works out exactly how much you might be able to borrow based on your deposit amount and your income. It’s quick, easy and gives you a clear target to aim for.

3 steps to get saving

If you are at the start of your journey, the target figure can look huge. But don’t panic. Break it down.

  1. Set up a dedicated account: don’t leave your deposit money in your normal current account. It’s too easy to spend it on a takeaway or a new coat. Open a separate savings account (like a LISA) and treat it like a bill you have to pay.
  2. Verify your budget: look at your spending honestly. Where can you cut back? cancelling a streaming subscription you don’t watch or making lunch at home a few days a week can add up to hundreds of pounds over a year.
  3. Watch your savings pile up: set up a standing order for payday. Pay your savings account before you pay for anything else. If you wait until the end of the month to save what’s "left over", there is often nothing left.

Frequently asked questions

Can I add to my deposit after I apply?

Sometimes, yes. If you manage to save another £1,000 before your mortgage offer is issued, you might be able to put it down to reduce your loan size. However, if you change the deposit amount after your mortgage offer is out, it can cause delays because we might need to re-score your application. Chat with your mortgage adviser to see if this is worth doing.

Can I use a loan from my parents?

We talked about gifted deposits earlier. A loan from parents is different. If your parents want you to pay the money back, it counts as a debt. We have to factor those repayments into your affordability check. Some lenders accept this, but others don’t. It is always simpler if the money is a clear gift.

Does the deposit cover fees too?

Nope. Your mortgage deposit is just for the house price. You will need to save extra cash for other costs. These usually include:

  • Solicitor fees.
  • Survey costs.
  • Removal costs.
  • Stamp Duty (though many first-time buyers don’t pay this).

Make sure you don’t use every single penny of your savings on the deposit and leave nothing for these bills!

Is the deposit refundable if the sale falls through?

If the sale falls through before you exchange contracts, you usually haven’t paid the deposit yet, so your money is safe in your bank. If you pull out after contracts are exchanged (which is very rare), you could lose your deposit. Your solicitor will explain all the legal risks to you before you sign anything.

What if I'm buying with a friend?

If you buy with a friend, you can combine your deposits. This can help you afford a bigger place or get a better LTV bracket. Just remember that you will be "jointly and severally liable" for the mortgage. That means if your friend stops paying their share, you are responsible for the whole payment, not just your half.

Why do I need to show proof of funds?

It can feel intrusive when we ask to see your savings statements. But we have to do it to comply with UK money laundering regulations. We need to see that the money has built up legitimately over time. If a large sum of money suddenly appeared in your account last week, we would need to ask where it came from. Having a paper trail of your savings is really helpful.

Mortgage jargon

Financial terms can be confusing. Here’s a quick breakdown of the words we’ve used on this page.

  • Loan to value (LTV): The percentage of the home’s price that you are borrowing. If you have a 10% deposit, your LTV is 90%.
  • Equity: The amount of the home you actually own. It’s the value of the home minus the mortgage you still owe.
  • Exchange of contracts: The point where the agreement to buy the house becomes legally binding.
  • Agreement in principle (AIP): A document from a lender saying how much they might be willing to lend you. It’s useful to have before you start viewing houses.
  • Conveyancing: The legal work involved in buying and selling a property. This is done by a solicitor or conveyancer.

Start your mortgage journey 

Whether you are just starting to save or you have your deposit ready to go, we are here to help you get the keys to your new home.

We work with the Mortgage Advice Bureau, their advisers can look at your deposit, your income and your budget to help you find a mortgage that fits your life.

Complete online enquiry form
Colleague In Red Stripy Top
Complete online enquiry form