First-Time Buyer Deposit Guide: A first-time buyer deposit is more than money saved. It is the part of the purchase that shows the lender how much risk is being shared between you and the mortgage provider.
The deposit affects the mortgage amount, loan-to-value, product choice and sometimes the interest rate. It can also affect how much room you have left for legal fees, moving costs, insurance and repairs.
This guide explains how first-time buyer deposits work, why loan-to-value matters, and what to check before applying for a mortgage.
First-Time Buyer Deposit: Quick Answer
Many first-time buyers may be able to buy with a 5% deposit, subject to lender criteria, affordability, credit checks and property type.
A bigger deposit can improve mortgage choice because it lowers the loan-to-value. However, the deposit is only one part of the decision. Lenders will still assess income, outgoings, credit history, employment, bank statements and the property itself.
For a full overview, read our First-Time Buyer Mortgage guide.
What Is a First-Time Buyer Deposit?
A deposit is the amount you contribute towards the property purchase from your own funds, family support, savings or an accepted source.
For example, if the property price is £250,000 and you have a £12,500 deposit, the deposit is 5%. The mortgage would cover the remaining 95%, if the lender agrees.
The lender will need to see where the deposit came from. This is part of the mortgage checks and anti-money laundering process.
Common deposit sources include:
- Savings
- Gifted deposit from family
- Proceeds from an asset sale
- Inheritance
- Bonus or employment income
- Lifetime ISA funds, where eligible
The source must be clear. A sudden large payment into your account may require an explanation.
What Does Loan-to-Value Mean?
Loan-to-value, known as LTV, compares the mortgage amount with the property value.
If you buy a home for £200,000 with a £20,000 deposit, the mortgage is £180,000. That means the LTV is 90%.
LTV matters because it helps lenders measure risk. A higher LTV means the lender is providing more of the purchase price. A lower LTV means the buyer is putting in more equity from the start.
Example:
- 5% deposit means 95% LTV
- 10% deposit means 90% LTV
- 15% deposit means 85% LTV
- 25% deposit means 75% LTV
A lower LTV can sometimes give access to more mortgage products. It may also help with rate choice. However, it does not guarantee approval.
Is a 5% Deposit Enough?
A 5% deposit may be enough for some first-time buyers. This is often called a 95% LTV mortgage.
A 5% deposit can help buyers enter the market sooner, but the application may face tighter checks. The lender will still want to know that the mortgage is affordable and that the property is suitable security.
With a smaller deposit, lenders may pay closer attention to:
- Credit score and credit history
- Missed payments
- Debt levels
- Bank statement conduct
- Stability of income
- Property type
- Property valuation
- Future monthly affordability
The right question is not only “Can I get a mortgage?” It is also “Can I afford the home after I move in?”
Should I Save a Bigger Deposit?
A bigger deposit can help in several ways. It may reduce the loan amount, lower the LTV and widen the number of mortgage options available.
However, using every pound of savings for the deposit can leave you exposed. Buying a first home often brings extra costs that appear quickly.
These can include:
- Solicitor fees
- Survey costs
- Valuation fees
- Buildings insurance
- Moving costs
- Furniture
- Repairs
- Service charges, if buying leasehold
- Stamp Duty, where payable
A balanced deposit plan keeps some money aside for completion and early homeownership costs.
Gifted Deposits for First-Time Buyers
Many first-time buyers receive help from parents or family members. This is often called a gifted deposit.
The lender will usually ask for a gifted deposit letter. This confirms that the money is a gift, not a loan, and that the person giving the money will not own part of the property.
The person giving the gift may also need to provide ID, proof of funds and bank statements.
A gifted deposit can help, but it must be handled correctly. If the money is repayable, some lenders may treat it as a loan. That could affect affordability.
Deposit and Stamp Duty
The deposit is not the only upfront cost. First-time buyers may also need to consider Stamp Duty Land Tax in England and Northern Ireland.
Some first-time buyers qualify for relief, depending on the property price and current rules. You can check current rules on GOV.UK Stamp Duty Land Tax residential property rates.
You can also estimate potential costs with our Stamp Duty Calculator.
Stamp Duty should be checked early. It can affect how much deposit you can safely use.
How to Prepare Your Deposit for a Mortgage Application
Before applying, make the deposit trail easy to follow.
A lender may ask for:
- Bank statements showing savings
- Gifted deposit letter
- Proof of inheritance
- Lifetime ISA evidence
- Sale documents, if funds came from an asset sale
- ID for the donor, where relevant
Avoid moving money between too many accounts just before applying. It can make the source harder to evidence.
A clean deposit trail helps the lender, broker and solicitor complete checks more smoothly.
When Mortgage Advice Can Help
Mortgage advice can help first-time buyers understand what deposit level may work across different lenders.
This can be useful if:
- You have a 5% deposit
- Your deposit is gifted
- Your income includes overtime or commission
- You are self-employed
- You have credit issues
- You are buying a flat or leasehold property
- You are unsure how much to keep aside for costs
Use our Affordability Calculator as an early guide before speaking to an adviser.
A deposit is the starting point. A suitable mortgage depends on the full picture.
Speak to a First-Time Buyer Mortgage Adviser
Buying your first home is not only about saving enough. It is about knowing how your deposit, income, credit file and property choice fit together.
Connect Lifetime can help you review your first-time buyer mortgage options before you apply.
FAQs: First-Time Buyer Deposits
What is the minimum deposit for a first-time buyer?
Some first-time buyers may be able to buy with a 5% deposit. This depends on lender criteria, affordability, credit history and the property.
Is a bigger deposit always better?
A bigger deposit may improve mortgage choice, but buyers should still keep money aside for fees, moving costs and early home expenses.
Can my parents gift my deposit?
Yes, many lenders accept gifted deposits. The person gifting the money may need to confirm it is not repayable.
Does a gifted deposit affect my mortgage?
It can affect the checks required. Lenders may ask for a gifted deposit letter and evidence of where the money came from.
Should I use all my savings as a deposit?
Not always. It is often sensible to keep a cash buffer for costs after completion.
