Mortgage Deposit Calculator UK

How to Calculate Mortgage Deposit

To calculate how much deposit you'd need, you simply take the property's cost and work out the percentage of the deposit you want to put down. 

For example, a £100,000 property x 0.1 will give you £10,000 which is a 10% deposit. Or, £100,000 x 0.15 will give you £15,000 which is a 15% deposit.

Subtract this percentage from 100% for the LTV (loan-to-value) ratio. With a 10% deposit, you'd subtract 10% from 100% to have a 90% LTV mortgage. A lower LTV will mean better interest rates but does involve putting down a higher deposit.

Calculate How Much Deposit You Need to Save Each Month

What Size Mortgage Can I Afford?

How Much Deposit Do I Need to Buy a House?

The size of deposit you'll need to buy a house will largely depend on the property's price. A deposit will usually need to be at least 5% of the property's cost. But the bigger the deposit, the better. This is because the larger the deposit, the less you need to borrow – and therefore less interest you pay overall.

You'll have a greater chance of being accepted for a mortgage with a larger deposit. You'll also have access to lower interest rates, better mortgage deals and lower monthly payments.

Use our mortgage deposit calculator (UK) to work out how to save for a bigger deposit.

If you were buying a property worth £200,000, here's how much deposit you'd need based on different deposit proportions:

• 5% deposit: £10,000
• 10% deposit: £20,000
• 15% deposit: £30,000
• 20% deposit: £40,000

How Do Mortgage Lenders Decide How Much to Lend?

• Size of deposit - a deposit is the amount of money you can put down upfront to secure the property. Deposits are typically 10% of the property price. But certain lenders will give mortgages to some first-time buyers with just a 5% deposit
• Your age - the older you are, the less time you'll have to pay off your mortgage before retirement. This means that your monthly repayments will be higher if you're on a repayment mortgage
• Your income - unsurprisingly, the higher your income, the more willing lenders are to lend you a larger amount
• Spending - mortgage lenders will want to see that you're responsible with money. If you have high debt and high expenditure, they'll be less inclined to let you borrow as much as you want
• Credit history - to get a mortgage, you'll need a good credit history. Several factors can boost your credit record, such as timely bill and credit card repayments. It's a good idea to keep on top of all your bills well before applying for a mortgage. You can also see how you look to lenders by checking your credit rating using Equifax or Experian

Lenders will also want copies of your payslips and bank statements to support your application.

What Mortgage Can I Get?

Once you know what you can borrow and the repayments you can afford, your next task is to compare mortgages. You'll have the choice of fixed rate mortgages, where your interest rate and monthly payment remain the same for the fixed period. Alternatively, you can choose a variable rate mortgage that tracks the Bank of England Base Rate. With this type of mortgage, your monthly payments can go up or down slightly each month.

When the fixed or discounted variable rate period ends, you’ll go onto your lender’s SVR (standard variable rate). SVRs tend to be more expensive than introductory rates, so you may want to speak to a broker about remortgaging up to 6 months before the end of your introductory rate period.

How Can I Get a Bigger Mortgage?

If the mortgage borrowing calculator gives you an amount that's too low to buy the home you want, you may want to consider some other options.

• Save for a bigger deposit - if you can only get a mortgage covering up to 80% of the cost of the property you want, you’ll need to save at least a 20% deposit
• Ask the Bank of Mum and Dad - if your parents are in a situation where they’re able to gift you money, then they may be able to contribute to your deposit and help you access better deals

How Much Deposit Do I Need if I Have Bad Credit?

Having a bad credit score doesn't necessarily mean you won't get a mortgage, but you may have to pay a higher deposit. While it varies from lender to lender, you may have to find a deposit of at least 25%. Each lender has its own criteria for calculating and assessing mortgage applications to determine the level of risk and how much they'd be willing to lend.

They'll want to look at:

• The type of adverse credit you have and how much you owe
• When the bad credit was registered
• If the debt is settled
• The circumstances surrounding or leading to the debt – e.g. divorce, death of a partner, loss of job, illness, etc.
• Your credit history
• The value of the property you want to buy
• Your income and employment type - whether retired, self-employed, employed or a contractor
• Your age

Is Interest Calculated on a Mortgage After Deposit?

Mortgage interest is calculated as a percentage of what you borrow. The deposit is excluded from the calculation. The interest is paid on the amount outstanding over the term of the mortgage.

Most residential mortgages are repayment mortgages. This means you'll be paying back some of the original amount you borrowed, plus paying the interest each month. If you make all your payments, you’ll have 100% equity in the property by the end of the mortgage term. However, most people remortgage onto a new deal when they come to the end of their introductory rate period as this is typically cheaper than going onto the lender’s SVR.

The longer the mortgage term, the more interest you'll have to pay overall. For instance, if you take out a mortgage of £200,000, you'll pay less interest over a 20 year mortgage than a 30 year mortgage.

There are also interest-only mortgages where you only make interest payments each month and don’t make any monthly capital repayments. This means you’ll still owe the original amount you initially borrowed at the start of your mortgage, until you pay it back via a repayment vehicle when you reach the end of your mortgage term or remortgage onto a new deal.

Can I Buy a House Without a Deposit?

Buying a house without a deposit in the UK, also known as a 100% mortgage, is possible but it works differently from a normal mortgage. This type of mortgage allows you to borrow the total cost of the property without putting down a traditional deposit.

No deposit or 100% mortgages are also known as Family Springboard or Family Assist mortgages. Many lenders have different versions of these products but they essentially work the same way: a family member of the borrower puts money into an interest-earning linked savings account with the lender or has a charge with no interest put on their property.

The money or equity acts as a placeholder deposit until the borrower has repaid a certain amount of the mortgage. The family member then receives their money back or has the amount taken off their property. The main risk here is that the family member could lose their savings or have their property repossessed should the borrower fail to meet their mortgage repayments.

There’s also a slightly different kind of no deposit mortgage called the Skipton Track Record Mortgage. Essentially, the lender uses your track record of making rent payments on time and in full for at least a year when considering your application. They do this instead of taking a deposit as security. When assessing how much you can borrow, the lender will look at your income and what you’ve been paying in rent. They’ll apply their own calculations and take the lower amount of these 2 to determine your maximum borrowing at 100% LTV.

Work Out How Much You Need to Save for Your Mortgage Deposit and How Long It Will Take You

Our deposit calculator is helpful if you want to see how long it will take you to save up a deposit to buy the property you want. If you think you'll struggle to save up in time, talk to us.

Here at John Charcol, our brokers can help you find loan options with lower deposit requirements, meaning you might be able to save up less and still buy the property you desire. Get in touch today to see how we can help.