Finance⏱ 6 min read
How Much Deposit Do You Need for a Mortgage?
A 5% deposit gets you on the ladder — but a 10% or 25% deposit gets you significantly better rates and lower monthly payments. Here's the full maths on what different deposit sizes cost you.
The deposit is the single biggest decision in buying a property — both the amount and the source affects your mortgage rate, monthly payments, and total cost over the mortgage term.
Loan-to-Value (LTV) Explained
LTV % = (Mortgage amount / Property value) x 100
or equivalently: LTV = (1 - deposit %) x 100
Property value: £250,000
Deposit: £25,000 (10%)
Mortgage: £225,000
LTV = 225,000 / 250,000 x 100 = 90% LTV
How Deposit Size Affects Your Mortgage Rate
DepositLTVTypical 2yr Fix Rate (2025)Monthly Payment*
5%95%5.5-6.5%~£1,440
10%90%4.8-5.8%~£1,310
15%85%4.4-5.2%~£1,250
25%75%4.0-4.8%~£1,170
40%60%3.8-4.5%~£1,100
*Approximate monthly payment on £225,000 mortgage, 25-year term. Exact rates vary by lender and personal circumstances.
The Cost of a Smaller Deposit Over the Mortgage Term
5% deposit vs 25% deposit on a £250,000 property:
5% deposit: £12,500 saved, mortgage £237,500 at 6% over 25yr
Monthly payment: ~£1,528
Total paid: £1,528 x 300 = £458,400
Total interest: £220,900
25% deposit: £62,500 saved, mortgage £187,500 at 4.5% over 25yr
Monthly payment: ~£1,040
Total paid: £1,040 x 300 = £312,000
Total interest: £124,500
Difference in total interest: £96,400
Extra deposit needed: £50,000
Net benefit of larger deposit: £46,400 over 25 years
(plus ~£490/month lower payments for 25 years)
Help to Buy and Government Schemes
Several schemes can supplement a smaller deposit:
- Lifetime ISA (LISA): Save up to £4,000/year, government adds 25% bonus (£1,000 max/year). Must buy first home worth under £450,000. Penalty for other withdrawals.
- Shared Ownership: Buy 25-75% of a property, pay rent on the rest. Lower initial deposit needed (5% of the share you're buying).
- Mortgage Guarantee Scheme: Government guarantees part of the mortgage, enabling 95% LTV mortgages with slightly better rates than unaided 95% products.
Beyond the Deposit: Other Buying Costs
Budget for on top of your deposit:
Stamp duty: 0-12% depending on price and first-buyer status
Legal fees (solicitor): £1,500-£2,500
Survey: £400-£1,500 (basic to full structural)
Mortgage arrangement fee: £0-£2,000
Moving costs: £500-£2,000
Total additional costs: typically £3,000-£8,000
These cannot be added to the mortgage — need separate cash.