Knowing how much money you need to buy a house is the first step in the home buying process.
Buying your first home with a mortgage boils down to two key figures in the most simple terms:
- how much money do I need to put down as a deposit and
- how much money can I borrow?
This article will focus on deposit requirements, rather than borrowing, but the deposit is not the only upfront cost that would be purchasers should plan for.
Deposits
The best way to think about the minimum deposit required is not as a fixed monetary sum, but as a percentage. The minimum amount required by most lenders is currently 5% of the property value, so long as you have the required income to borrow the remainder, but a larger deposit of 10% or 15% will give you access to better rates, helping to minimise the interest cost on the borrowing.
This means a buyer targeting a £300,000 home might need £15,000 for a 5% deposit, £30,000 for a 10% deposit, plus a further allowance for legal work, searches, surveys, mortgage fees and moving costs (more on that below).
There are some exceptions to this rule:
- Lloyds Bank recently announced a £5k deposit mortgage scheme, where you can potentially use a deposit of £5k even if that amounts to less than 5% of the purchase price, however this is capped at properties up to £300,000.
- Skipton Building Society offer a ‘track record’ mortgage, where borrowers can borrow 100% of the purchase price, but only if they can show a track record of renting a property and keeping up with payments at a level that is the same or higher as the new mortgage repayments would be.
Terms and conditions do apply to these exceptions, and there will still be affordability checks that need to be passed. In the vast majority of cases, however, it’s best to aim to save 5% of the property value as a minimum.
Saving Up
On the subject of saving, the best thing to do is establish what your monthly surplus is that you can safely put away whilst keeping up with all of the essentials. Completing a budget planner is the first step here. Using a cash ISA a good option for this, as you won’t incur any income tax on the interest regardless of your income tax band.
You can also open up a LISA (lifetime ISA) and save up to £4,000 per year until the age of 50. When using the monies to buy a home, the Government tops this up with a 25% bonus, meaning a maximum bonus of £1,000 for every £4,000 saved. This counts towards your annual £20,000 ISA allowance in conjunction with any other ISA contributions. The Government has planned to phase these out in2028, but any savers who have open one up beforehand with a minimum of £1 can continue to save in to them afterwards.
Other Costs to Budget For
Stamp Duty or Land Tax
In England and Northern Ireland, first-time buyers currently pay no Stamp Duty Land Tax on the first £300,000 of an eligible purchase and 5% on the portion from £300,001 to £500,000. If the property costs more than £500,000, first-time buyer relief does not apply.
Legal and Conveyancing Fees
A solicitor or licensed conveyancer handles the legal transfer of ownership, searches, contracts, lender requirements and completion arrangements. Costs vary by property type, location and complexity, but first-time buyers should commonly budget at least £1,000 to £2,500 or more, including VAT and disbursements such as searches and Land Registry fees.
Mortgage Fees
Mortgage products can include booking, arrangement, valuation or account fees. Often, they are £999. Some products are fee-free, but the interest rate may be higher, so buyers should compare the total cost rather than the headline rate alone. Often, the lender’s product fees can be added to the loan, instead of being paid upfront.
Survey and Valuation Requests
A lender valuation protects the mortgage lender, but it is not the same as a detailed survey for the buyer. Many first-time buyers choose a survey to understand the condition of the property before committing. Costs depend on the survey level and property size, with basic surveys usually cheaper than full building surveys.
Moving, Set Up and Insurances
Moving costs can include removals, van hire, packing materials, storage, utility setup, broadband installation and basic furniture or appliances. Buildings insurance is usually required from exchange of contracts if you are buying a freehold house, and contents insurance is worth considering from the day you move in.
Worked Examples
| Purchase Price | 5% Deposit | 10% Deposit | Table Estimated Extra Buying Costs | Illustrative cash needed |
|---|---|---|---|---|
| £250,000 | £12,500 | £25,000 | £3,500 - £7,000 | £16,000 - £32,000 |
| £300,000 | £15,000 | £30,000 | £4,000 – £8,000 | £19,000 – £38,000 |
| £400,000 | £20,000 | £40,000 | £9,000 – £14,000 including possible Stamp Duty | £29,000 – £54,000 |
| £500,000 | £25,000 | £50,00 | £13,000 - £19,000 | £38,000 - £69,000 |
These examples are planning estimates rather than quotes. The exact amount will depend on the property price, location, mortgage product, survey type, solicitor’s quote, tax rules and whether you need removals, storage or immediate repairs.
Savings Post Completion
It is risky to spend every pound of savings on the deposit and completion costs. A sensible first-time buyer should keep an emergency buffer for repairs, higher utility bills, council tax, service charges, commuting costs and furniture. Even a modest reserve can reduce the pressure if the boiler fails, a survey issue becomes urgent or the first mortgage payment arrives earlier than expected.
How to Work Out Your Own Number
- Choose a realistic target property price for the area where you want to buy.
- Calculate your deposit at 5%, 10% and 15% to see the difference in cash needed.
- Check whether Stamp Duty or the relevant land tax applies.
- Get quotes for conveyancing, surveys, removals and mortgage advice if needed.
- Add a contingency fund so you are not left with no savings after completion.
Bringing It All Together
A first-time buyer may be able to purchase with a 5% deposit, but the practical savings target is usually higher once fees and a safety buffer are included. For a typical first home, many buyers should think in terms of the deposit plus at least several thousand pounds in additional costs. If in doubt, speak to an independent financial adviser for help setting a budget and a timetable for the purchase that is tailored to you.
Article by Cain Stennett
Financial Adviser
Mortgage Adviser
Note: This article is for educational purposes only. For advice bespoke to you, it is recommended that you speak with a qualified, independent mortgage or financial adviser.
Your home may be repossessed if you do not keep up repayments on your mortgage
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