Mortgage Deposit and Loan-to-Value Explained

Most UK home buyers use a combination of their own deposit and a mortgage to purchase a property. The relationship between these amounts is known as the loan-to-value ratio, usually shortened to LTV.

Your LTV can affect the mortgage products available, but it does not replace the lender’s affordability, credit and property checks.

Simple answer: Your deposit is the part of the property price you provide. Your mortgage covers the remaining amount accepted by the lender. LTV shows the mortgage as a percentage of the property’s value.

What Is a Mortgage Deposit?

A mortgage deposit is the buyer’s contribution towards the property purchase. It normally comes from savings, existing property equity or another source accepted by the mortgage lender and conveyancer.

Example

Property price: £300,000
Buyer’s deposit: £30,000
Mortgage required: £270,000

The buyer provides 10% of the price, while the mortgage lender provides the remaining 90%.

The deposit is only one part of the money buyers need. Stamp Duty or Land Transaction Tax, conveyancing fees, surveys, mortgage fees and moving costs may need to be funded separately.


What Does Loan-to-Value Mean?

Loan-to-value compares the mortgage amount with the lender’s accepted property value.

LTV formula:

Mortgage amount ÷ property value × 100 = LTV percentage

Example

Mortgage required: £270,000
Property value: £300,000

£270,000 ÷ £300,000 × 100 = 90% LTV

The remaining 10% is normally provided by the buyer as the mortgage deposit.


Mortgage Deposit and LTV Examples

Property Price Buyer’s Deposit Mortgage Required LTV
£300,000 £15,000 £285,000 95%
£300,000 £30,000 £270,000 90%
£300,000 £45,000 £255,000 85%
£300,000 £60,000 £240,000 80%
£300,000 £75,000 £225,000 75%
£300,000 £120,000 £180,000 60%

Lenders commonly group mortgage products into LTV bands. Reaching a lower band may change the range of products available, but the result depends on the lender and current mortgage market.


How Much Deposit Do UK Buyers Usually Need?

Many residential mortgage products require a deposit of at least 5% to 10% of the property value. The amount required depends on the buyer, property and lender.

Mortgage LTV Buyer’s Deposit Deposit on a £250,000 Property
95% LTV 5% £12,500
90% LTV 10% £25,000
85% LTV 15% £37,500
80% LTV 20% £50,000
75% LTV 25% £62,500

A particular property may require a larger deposit because of its construction, condition, location, lease terms, new-build status or the lender’s valuation.

Important: A mortgage advertised as requiring a 5% deposit does not mean every buyer or property will qualify for that mortgage.

How a Larger Deposit Changes the Mortgage

A larger deposit reduces both the mortgage amount and the LTV. This may affect:

  • the mortgage products available;
  • the interest rate offered;
  • the monthly repayment;
  • the total interest charged;
  • the lender’s property criteria; and
  • the buyer’s exposure to negative equity.

Example

Two buyers want to purchase identical £300,000 properties.

Buyer A Buyer B
Deposit £15,000 £60,000
Mortgage £285,000 £240,000
LTV 95% 80%

Buyer B needs to borrow £45,000 less. However, mortgage approval still depends on affordability, credit checks and the property.


What Is a 95% LTV Mortgage?

A 95% LTV mortgage allows an eligible buyer to borrow up to 95% of the lender’s accepted property value and provide the remaining 5% as a deposit.

Example

Property value: £240,000
5% deposit: £12,000
95% mortgage: £228,000

The UK Government introduced a permanent Mortgage Guarantee Scheme in July 2025 to support the availability of mortgages between 91% and 95% LTV through participating lenders.

The scheme can support eligible first-time buyers and home movers, but buyers must still pass the lender’s normal affordability, credit and property checks.

What the guarantee means: The government guarantee protects the participating lender against part of a possible loss. It does not pay the buyer’s deposit, guarantee approval or protect the buyer from missed mortgage payments.

Not every 95% mortgage is part of the government scheme, and not every lender participates.


Can You Get a Mortgage Without a Deposit?

Some lenders may offer specialist 100% LTV or no-deposit mortgages under limited criteria. These may depend on factors such as rental-payment history, family support, savings held as security or a guarantor arrangement.

These products are different from the Government Mortgage Guarantee Scheme, which supports lending between 91% and 95% LTV.

No-deposit mortgages generally involve a higher lending risk because the buyer begins with little or no equity in the property. Availability and eligibility can be limited.


How the Mortgage Valuation Affects Your Deposit

The estate agent’s asking price and your accepted offer do not decide how much the mortgage lender believes the property is worth.

The lender carries out a mortgage valuation before confirming the amount it is prepared to lend.

If the lender values the property below the agreed purchase price, this is commonly called a down valuation.

Down-Valuation Example

Agreed purchase price: £300,000
Buyer expected a 90% mortgage: £270,000
Expected deposit: £30,000

The lender values the property at £280,000. If the lender will provide a maximum 90% LTV mortgage based on that valuation:

£280,000 × 90% = £252,000 mortgage

If the purchase price remains £300,000, the buyer would need:

£300,000 − £252,000 = £48,000

The deposit requirement has therefore increased from £30,000 to £48,000.

Hidden deposit risk: The lender’s valuation can change the mortgage amount even when the seller has already accepted your offer.

Mortgage Deposit vs Exchange Deposit

The terms mortgage deposit and exchange deposit are often confused, but they describe different parts of the purchase.

Deposit Type What It Means
Mortgage deposit The buyer’s total financial contribution towards the property price.
Exchange deposit The contractual deposit paid through the conveyancers when contracts are exchanged.
Reservation fee A separate payment sometimes used for a new build or auction purchase.

The traditional exchange deposit is 10% of the purchase price. A buyer using a 95% mortgage may only have a 5% mortgage deposit, so the conveyancers may need to agree a reduced exchange deposit with the seller.

Paying a reduced amount at exchange may not necessarily limit the buyer’s contractual responsibility to that lower amount if the buyer later fails to complete. The signed contract determines the position.


Where Can a Mortgage Deposit Come From?

A deposit can come from several sources, subject to the lender’s requirements and source-of-funds checks.

Deposit Source Information Commonly Required
Personal savings Bank statements showing how the savings accumulated.
Sale of another property Sale details, mortgage-redemption figures and evidence of available equity.
Gift from family A gifted-deposit letter, donor identification and evidence showing the source of the funds.
Inheritance Probate, estate or solicitor documentation and evidence of receipt.
Lifetime ISA Account information and the required withdrawal declarations through the conveyancer.
Help to Buy ISA Closing statement and conveyancer application for the available government bonus.
Investment sale Investment statements and evidence showing the sale and transfer of funds.
Overseas funds Foreign bank statements, source-of-wealth evidence and possibly certified translations.
Developer incentive Full disclosure of the incentive to the lender, valuer and conveyancer.

Deposit money appearing suddenly in an account without a clear explanation may lead to further questions from the lender or conveyancer.


How Does a Gifted Deposit Work?

A gifted deposit is money provided by another person, commonly a parent or close family member, to help fund the purchase.

The mortgage lender and conveyancer commonly need confirmation that:

  • the money is a genuine gift;
  • the donor does not expect repayment;
  • the donor will not own part of the property unless formally agreed;
  • the donor will not obtain a charge over the property;
  • the donor will not live at the property unless disclosed; and
  • the source of the donor’s money can be verified.

If the money must be repaid, it is not a straightforward gift. It may be treated as a loan and can affect the affordability assessment and mortgage decision.

Important: A gifted deposit must be disclosed. Describing a repayable family loan as a gift can create problems with the lender and conveyancing process.

Using a Lifetime ISA for a House Deposit

An eligible first-time buyer can use Lifetime ISA funds towards a UK home purchase if the government conditions are satisfied.

Current conditions include:

  • the property must cost £450,000 or less;
  • the Lifetime ISA must have been open for at least 12 months from the first payment;
  • the buyer must be purchasing with a mortgage;
  • the property must be intended as the buyer’s home; and
  • the funds must be released directly to the conveyancer.

Two eligible first-time buyers purchasing together can each use their own Lifetime ISA, provided each person satisfies the conditions.

The conveyancer applies for the funds. The ISA provider can have up to 30 days after receiving the complete information to release the money, so the withdrawal is normally prepared before it is urgently needed.


Can Overseas Money Be Used as a Deposit?

Overseas funds may be accepted, but the lender and conveyancer can require additional evidence.

Checks may cover:

  • the country from which the funds originate;
  • the person who owns the money;
  • how the money was earned or accumulated;
  • foreign bank statements;
  • currency conversions and transfer records;
  • local tax or inheritance documents;
  • certified translations; and
  • financial-crime or sanctions checks.

Overseas funds can therefore take longer to verify than money held in an established UK savings account.


What If Joint Buyers Provide Different Deposits?

Joint buyers do not always contribute equal deposit amounts. For example, one buyer may provide £60,000 while the other provides £20,000.

The mortgage application records the borrowers, but it does not by itself explain how the buyers want their ownership and contributions treated between them.

The conveyancer may discuss:

  • joint tenants and tenants in common;
  • the intended ownership shares;
  • whether the original deposits should be protected; and
  • whether a declaration of trust is required.

Deposit contributions and legal ownership are connected issues, but they are not automatically the same thing.


What Is Negative Equity?

Negative equity means the outstanding mortgage is greater than the property’s current value.

Example

Purchase price: £250,000
Original 95% mortgage: £237,500
Buyer’s deposit: £12,500

If the property value later falls to £225,000 while the mortgage balance remains £232,000, the buyer has approximately £7,000 of negative equity.

Negative equity can make selling or remortgaging more difficult because the property sale may not produce enough money to repay the mortgage.

Buyers using a smaller deposit begin with less equity, so a relatively small fall in property value can remove that initial equity.


Why a Mortgage Deposit May Need to Increase

A buyer may need a larger deposit than originally expected because:

  • the lender down-values the property;
  • the buyer does not pass the affordability assessment for the requested loan;
  • the selected property is not accepted at the expected LTV;
  • the lender applies a lower maximum LTV to new builds or unusual construction;
  • the lease length or service charge affects lending criteria;
  • a mortgage product is withdrawn or changed;
  • the buyer adds mortgage fees to the loan, increasing the LTV; or
  • part of the proposed deposit source is not accepted.

A deposit calculation based only on the asking price may therefore change during the mortgage and valuation process.


Deposit Checks Before a Mortgage Offer

Mortgage lenders and conveyancers may need to establish:

☐ The total deposit amount

☐ Where every part of the deposit came from

☐ How long the money has been held

☐ Whether any amount is gifted

☐ Whether any amount must be repaid

☐ Whether the donor expects an interest in the property

☐ Whether funds are coming from overseas

☐ Whether a Lifetime ISA or Help to Buy ISA is involved

☐ Whether a developer or seller incentive has been offered

☐ Whether sufficient money remains for fees and property taxes


Frequently Asked Questions

Is a 10% deposit always enough for a mortgage?

No. A 10% deposit produces a 90% LTV mortgage, but eligibility depends on affordability, credit history, the lender’s criteria and the property.

Is LTV based on the asking price or purchase price?

The lender considers its accepted property valuation and the purchase details. If the valuation is lower than the agreed price, the available mortgage and required deposit may change.

Can mortgage fees be added to the loan?

Some products allow certain fees to be added. This increases the amount borrowed and may affect the LTV and total interest charged.

Can a family member lend the deposit?

Some lenders may accept a family loan, while others require the money to be an unconditional gift. The arrangement must be disclosed accurately.

Can I use a personal loan for my mortgage deposit?

Many lenders restrict borrowed deposits. Any loan must be disclosed because its monthly repayment and outstanding balance can affect affordability.

Does the government own part of my home under the Mortgage Guarantee Scheme?

No. The scheme provides a guarantee to participating lenders. It is not a shared-equity arrangement and does not give the government an ownership share.

Does a bigger deposit guarantee a lower mortgage rate?

No. A lower LTV may provide access to different products, but rates also depend on the lender, product, market and buyer’s eligibility.


Final Takeaway

A mortgage deposit is more than a percentage of the asking price. Buyers need to understand how the lender’s valuation, LTV band, affordability assessment and deposit source can change the amount required.

Key point: Calculate the deposit using the expected purchase price, but remember that the lender will make its own decision about the property value and mortgage amount.

Official Sources