How much down on a 400k house

If you're thinking about buying your first home, it's important to get to grips with how mortgage deposits work, including how much you'll need to save and the rules around gifted deposits. 

Let's start with the basics. Mortgages are generally available at up to 95% loan-to-value. This means it's possible to get on the property ladder with a deposit of 5% of the property's purchase price, and a mortgage covering the remaining 95%.

Here's how much cash you'd need to put down on a £200,000 property, based on different deposit sizes:

• 5% deposit: £10,000
• 10% deposit: £20,000
• 15% deposit: £30,000

How much will you need to save?

To calculate how much you might need to save for your mortgage deposit, there are two things you should consider: typical property prices and monthly repayment costs.

Typical property prices in your area

You can get a rough idea of local house prices from property portals such as Rightmove or Zoopla, and by speaking to local estate agents.

The figures you'll see on portals and agent websites are asking prices, so they might be a little higher than what the properties are really worth. 

For more concrete information, you can check how much homes in the area have sold for using the Land Registry's price paid tool. 

How much you can afford in repayments

Mortgage rates are changing all the time, and the right deal for you might not necessarily be the one with the lowest interest rate.

On top of the rate, you'll need to factor in things such as up-front fees, early repayment charges, and how many years you want to take to pay back the loan (the mortgage term). All of this is explained in our guide to finding the best mortgage deals.

To work out how much a mortgage could cost you each month, use our mortgage repayment calculator.

If the repayments for a low-deposit mortgage are too high for you, you'll either need to save a bigger deposit or look into alternatives, such as guarantor mortgages.

• Find out more: the costs of buying a house

Reasons to save a bigger mortgage deposit

While you might be able to buy a home with a deposit of 5%, there are plenty of reasons to save more if you can.

• Cheaper monthly repayments: It might sound obvious, but the bigger your mortgage deposit, the smaller your loan will be and the cheaper your monthly repayments.
• Better mortgage deals: A larger deposit will make you less risky for mortgage lenders and, as a result, they'll generally offer you lower interest rates. For example, 90% mortgages are generally around 0.5% cheaper than 95% deals.
• Improved chance of being accepted: All lenders conduct affordability checks to work out whether you can afford the mortgage repayments, based on your income and outgoings. If you only put down a small deposit, it’s more likely you will fail these checks because you'll need to spend more on your mortgage each month.
• Bigger buying budget: Lenders typically offer a loan of up to four-and-a-half times your annual salary, so if your salary is relatively low and you can't borrow enough, you might need a larger deposit.
• Less risky: If you own more of your home outright, you're less likely to fall into negative equity, where you owe more on your mortgage than your property is worth. Being in negative equity can make moving house or switching mortgage difficult.

Find out more: how to save for a mortgage deposit

Mortgage deposit calculator

Saving for a deposit can seem like a never-ending journey. We've created a deposit calculator to give you an idea of when you'll have saved enough to buy a home in your area.

Simply answer the questions below to see how long it might take.

Exchange deposits

When exchanging contracts on a property, you'll usually pay a deposit as part of legally committing to the purchase.

The standard amount for an exchange deposit is 10% of the property price – but if you're planning on buying with a 5% deposit, that can usually be negotiated by your solicitor or conveyancer. Let them know as early in the buying process as possible so they can warn the seller's conveyancer.

The exchange deposit has been a sticking point with some people who have wanted to use the bonus earned on their Help to Buy Isa at this stage of buying their first home. As the bonus is only paid on completion, you can't use it as an exchange deposit, so will need to have money from an alternative source.

If this is going to be difficult for you, your conveyancer might be able to negotiate a further reduction to the exchange deposit.

• Find out more: exchange and completion

Loan-to-value calculator

You'll often see mortgages described as being a certain 'LTV'. This stands for loan-to-value, and means the percentage of the property price that will be covered by the mortgage.

For example, if you provided a 5% deposit, you'd need a mortgage with a 95% LTV.

To find out your LTV, simply enter your deposit amount and the property price below. 

Your options if you're struggling to save

Help is at hand if you're struggling to save up a big enough deposit for your first home.

• First Homes: government scheme offering discounts of up to 30% for first-time buyers.
• Shared ownership: you buy a share of the property and pay rent on the rest. 
• Buy a house with your friends: it's not without its risks, but works well for some.
• Get help from your parents or family members: they don't necessarily need to give you cash towards your deposit. Instead, they can use their savings or property as collateral against your mortgage.
• Lifetime Isa: this is a savings account offering a 25% bonus from the government. You need to be aged under 40 when you open it, and can't access your savings or the bonus until you've had the account for at least a year.

If you need help managing your finances during the cost of living crisis, try our free My Money Health Check tool for personalised money-saving tips.

100% mortgages

A 100% mortgage covers the full cost of the house, meaning you don't need a deposit.

Currently, the only kind of 100% mortgage you can get is a guarantor mortgage. This is where a family member takes on some of the risk of your loan by offering their home or savings as security in the event that you don't make your mortgage repayments.

There are very few of these deals, and they carry a significant risk of negative equity – when you owe more on your mortgage than your property is worth – so you and your family should take professional advice before applying.

• Find out more: 100% mortgages advice guide

Buy-to-let deposits

To get a buy-to-let mortgage, you'll usually need a deposit of at least 15% of the property's value. But as with residential mortgages, the higher the deposit, the better the deal you're likely to get.

Lenders ask for a higher deposit because buy-to-let properties are deemed a riskier investment. As you won't be living there yourself and will likely need rent from tenants in order to keep up with your repayments, there's more that could go wrong. 

• Find out more: buy-to-let mortgages explained

Click below for answers to some of the most frequently asked questions about property deposits.

Will I get my mortgage deposit back?

While other kinds of deposits – such as a damage deposit for a holiday home – might be returned to you, this isn't how property deposits work. Instead, you're paying a small portion of the overall price and the mortgage provider is lending you the rest. Then, over time, you gradually pay back the mortgage lender.

You won't get the deposit back once you've bought the house or if you move, but as you've used it to buy a percentage of the house, you essentially keep it as equity.

Who do I pay a mortgage deposit to?

While you need to prove to your mortgage lender that you have the funds saved, you actually pay the deposit to your conveyancer at the point of exchanging contracts. 

Once the contracts have been signed and the mortgage has completed, your deposit will go to the seller, along with the money from your lender covering the rest of the property value.

Can I pay for my mortgage deposit with a loan?

This often depends on the type of loan, your lender, and how much you want to borrow. 

Lenders will ask how you've come up with the money for your deposit, and will usually state that it needs to be from a 'non-refundable' source – ie your own savings or a gift from a family member – rather than a loan.

However, loans repayable upon the sale of the property might be OK with some lenders. This might be the case if your parents or a friend has loaned you some money for your deposit. 

Even if you're taking out a loan that's repayable on a monthly basis, some lenders might accept it, but they'll factor it in to how much they will lend. So, if you've taken out a loan for your deposit, it's likely you'll be able to borrow less than if you paid from your own savings. 

Can parents contribute towards my mortgage deposit?

Yes, but there are certain procedures that need to be followed, such as providing a letter confirming that the money won't need to be repaid. 

Some lenders might also limit the percentage of your deposit that can come from a family member.

• Find out more: how parents can help first-time buyers

Will I need a bigger deposit if I have bad credit?

Quite possibly. When you're applying for a mortgage, lenders will take your deposit and salary into account, but they'll also use your credit history as part of their assessment of whether you're likely to be able to pay back a large loan. If your credit history shows that you've failed to keep up with other loan repayments, defaulted on bills or faced County Court Judgements (CCJs), some lenders won't lend to you.

Other lenders will still consider you for a mortgage, but it's likely that you'll have to prove you've kept up with repayments for a certain amount of time, and the most competitive rates and higher LTVs might not be an option.

• Find out more: bad credit mortgages