How much deposit do you actually need?

Most UK mortgage lenders want a minimum deposit of 5% of the property's purchase price. On a £200,000 home that's £10,000, which is a serious sum to set aside before you've even thought about solicitor's fees. But the minimum is rarely the cheapest option, and understanding that early can save you thousands over the life of your mortgage.

As a rule of thumb, the more you put down, the less you borrow, and the less risky you look to a lender. That combination usually means a lower interest rate. Many first-time buyers aim for 10%, which is a sensible target to work towards. If you can stretch to 15% or 20%, you'll typically find a wider choice of deals and noticeably lower monthly payments.

It's worth knowing about two government-backed savings routes too. A Lifetime ISA lets you save up to £4,000 a year towards a first home, with a 25% bonus added by the government, worth up to £1,000 annually. There's a cap on the property price you can buy with one, so check the current rules before you commit. Shared ownership is another option, where you buy a share of a property and pay rent on the rest, meaning a smaller deposit is needed.

Why a bigger deposit gets you a cheaper mortgage

Lenders group mortgages by loan-to-value, or LTV. If you buy a £200,000 property with a £20,000 deposit, you're borrowing £180,000, which is a 90% LTV mortgage. Cross into the 85% or 80% bracket and the rates on offer usually drop.

The difference isn't small. On a £180,000 repayment mortgage spread over 30 years, moving from a rate of 6% to 5% cuts your monthly payment by roughly £113. That's more than £1,350 a year, and around £6,700 over the length of a five-year fixed deal. The interest rate you're offered matters far more than the arrangement fee, so it's worth delaying your purchase by a few months if it means dropping into a better LTV band.

The costs that catch first-time buyers out

Your deposit isn't the only money you'll need on completion day. Budget for these on top, and keep them in a separate pot so you're not tempted to dip into your deposit:

• Conveyancing fees — typically £1,000 to £1,500 for a straightforward purchase, plus searches and disbursements.
• A survey — a basic valuation is often free with the mortgage, but a proper homebuyer survey costs several hundred pounds and is worth having.
• Mortgage product fee — often £999, though some deals let you add it to the loan, which costs more in interest.
• Stamp duty — first-time buyer relief exists, but the thresholds have changed in recent years, so check the current figures for your nation before you budget.
• Removals, furniture and buildings insurance — easily £1,000 or more if you're starting from scratch.

As a rough guide, set aside 2% to 3% of the purchase price for these extras.

Saving for a deposit without burning out

Deposit saving is a marathon, and the people who succeed tend to be the ones who make it automatic rather than heroic. A few habits that genuinely move the needle:

• Transfer on payday, not at the end of the month. A standing order for £300 the day you're paid beats hoping there's something left over.
• Keep the money somewhere separate. A dedicated savings account you don't see in your current account balance is less tempting to raid.
• Review your fixed costs once a year. Broadband, mobile, insurance and streaming subscriptions creep up quietly. Cutting £60 a month is £720 a year.
• Use your full Lifetime ISA allowance if you can. The 25% bonus is effectively free money, and there's no other savings product quite like it.
• Set a target date, not just a target number. "£25,000 by next September" keeps you focused far better than an open-ended goal.

Getting your credit score mortgage-ready

Your deposit is only half the story. Lenders also look hard at your credit history, and a stronger file can unlock better rates even with the same deposit. Start tidying things up at least six months before you apply.

• Register on the electoral roll at your current address. It's one of the simplest and most effective things you can do.
• Check your credit reports from all the main agencies and dispute any errors. Mistakes are more common than you'd think.
• Keep credit card balances low. Using under 30% of your available limit looks healthier than running close to the max.
• Avoid new credit applications. Each one leaves a mark, and several in a short period signals desperation to lenders.
• Don't close old accounts for the sake of it. A long, well-managed history works in your favour.
• Steer clear of payday loans and buy-now-pay-later in the months before applying. They can count against you.

What to do in the six months before you apply

Once you're within touching distance, shift from saving mode into preparation mode. Get a mortgage agreement in principle from a broker or lender, which tells you what you can realistically borrow and shows estate agents you're serious. Keep your bank statements clean: no unexplained large deposits, no gambling transactions, and no dipping into your overdraft.

Gather your documents early — payslips, bank statements, proof of deposit and identification. If any of your deposit is a gift from family, ask for a signed letter confirming it's a gift rather than a loan, as most lenders will request one.

Finally, be honest about what you can afford. A deposit that leaves you with no emergency fund is a fragile position to be in when the boiler breaks in your first winter. Leave yourself a cushion, buy well within your means, and your first home will feel like a milestone rather than a millstone.