Your deposit is the single most important factor in determining both whether you can get a mortgage and how much it will cost you each month. A larger deposit means a lower loan-to-value (LTV) ratio, which in turn means access to better interest rates and lower monthly payments.
But saving a large deposit takes time, and the property market does not stand still. This guide explains the different deposit tiers, how they affect your mortgage costs, and the various sources you can use to build your deposit fund.
Deposit Tiers Compared
UK lenders offer mortgages at various LTV ratios, but the key thresholds are 95%, 90%, 85%, and 80% LTV — corresponding to deposits of 5%, 10%, 15%, and 20% respectively. Here is how they compare for a £250,000 property:
| Deposit % | Deposit Amount | LTV | Typical Rate* | Monthly Payment** | Total Interest** |
|---|---|---|---|---|---|
| 5% | £12,500 | 95% | 5.4% | £1,385 | £178,000 |
| 10% | £25,000 | 90% | 4.8% | £1,296 | £163,800 |
| 15% | £37,500 | 85% | 4.5% | £1,186 | £143,300 |
| 20% | £50,000 | 80% | 4.2% | £1,081 | £124,300 |
*Indicative rates as of early 2026 for a 2-year fixed deal. **Based on a 25-year repayment term at the stated rate for the full term (illustrative only — actual costs will vary based on your rate changes over the mortgage term).
The 5% Deposit: Getting on the Ladder
A 5% deposit is the minimum most lenders accept for a residential purchase. On a £250,000 property, that is £12,500 — a significant but achievable amount for many buyers, especially with government support like the Lifetime ISA.
The trade-off is cost. At 95% LTV, you are borrowing the maximum the lender is comfortable with, and the interest rate reflects that risk. You will also have very little equity in the property, meaning even a small dip in house prices could push you into negative equity (where you owe more than the property is worth).
That said, a 5% deposit gets you on the property ladder. If prices continue to rise, you will build equity naturally over time, and you can remortgage to a better rate once you reach a lower LTV threshold.
The 10% Deposit: The Sweet Spot for Many Buyers
A 10% deposit is often considered the first significant threshold. Lenders view 90% LTV as meaningfully lower risk than 95%, and the improvement in interest rates is substantial. You also gain access to a much wider range of mortgage products — many lenders who do not offer 95% LTV deals do offer 90%.
For a £250,000 property, a 10% deposit is £25,000. While that is double the 5% figure, the monthly savings and reduced total interest make it well worth the extra effort if you can manage it.
15% and 20%: Best Rates, Best Terms
At 85% LTV (15% deposit) and 80% LTV (20% deposit), you enter the territory of the most competitive mortgage rates. Each step down unlocks better deals, and at 80% LTV, you are generally accessing the best standard rates available.
A 20% deposit also provides a substantial equity buffer, protecting you against market downturns and giving you more flexibility if you need to sell or remortgage in the future.
However, saving 20% of a £250,000 property (£50,000) is a major undertaking. If it means delaying your purchase by several years, you need to weigh the savings against potential house price increases and the cost of renting in the meantime.
Where Can Your Deposit Come From?
Lenders want to know the source of your deposit and will ask for evidence. Legitimate sources include:
Personal Savings
The most straightforward source. Lenders want to see the savings building up over time in your bank statements. A sudden large deposit into your account will be questioned. Regular saving over months or years is the ideal evidence. High-interest savings accounts, fixed-rate bonds, or cash ISAs are all suitable vehicles.
Lifetime ISA (LISA)
Available to anyone aged 18 to 39. You can save up to £4,000 per year and the government adds a 25% bonus (up to £1,000 per year). The property must cost £450,000 or less, and the LISA must have been open for at least 12 months before you use it. If you are under 40 and planning to buy, opening a LISA should be one of the first things you do — even if you only deposit £1 to start the clock.
Gifted Deposits
Family gifts are one of the most common deposit sources for first-time buyers. Lenders accept gifted deposits, but they require a signed gift letter confirming that the money is a gift, not a loan, and that the giver has no interest in the property. The giver will also need to provide proof of the source of their funds (bank statements showing where the money came from), as part of anti-money laundering checks.
Inheritance
Money received through inheritance is acceptable. You will need to provide probate documentation or a letter from the executor confirming the amount and your relationship to the deceased. If the inheritance was received some time ago, showing it in your bank statements over the relevant period is usually sufficient.
Sale of Another Asset
Proceeds from selling a vehicle, investments, or another property can be used as a deposit. You will need documentation showing the sale and the transfer of funds into your account.
Equity from an Existing Property
If you are selling a property to buy another, the equity from the sale forms your deposit. This is the most common deposit source for non-first-time buyers.
Proving Your Deposit
Lenders and solicitors are required by law to verify the source of your deposit as part of anti-money laundering (AML) regulations. This means you will need to provide a clear paper trail showing where the money came from and how it ended up in your account.
For savings, this means bank statements showing the balance building over time. For gifts, it means a gift letter plus evidence of the giver's source of funds. For inheritance, it means probate documents. For any other source, it means documentation that links the funds to a legitimate origin.
What About Zero-Deposit Mortgages?
True 100% LTV mortgages are extremely rare in the UK. A handful of lenders offer them, but usually with strict conditions — such as requiring a family member to provide a savings guarantee or put up their own property as collateral. These products carry higher interest rates and are only suitable for very specific circumstances.
If saving a deposit feels impossible, explore government schemes like Shared Ownership (where you buy a share of the property and rent the rest) or look into family-assisted mortgages where a relative's savings or equity acts as additional security.
Related Guides
- Government Schemes 2026 — LISA, Shared Ownership, First Homes, and more
- Improving Your Credit Score — boost your chances of approval
- How to Apply for a Mortgage — the complete application process
- Mortgage Fees Explained — all costs beyond the deposit