If you’ve been looking into buying a property in the UK, you’ve probably seen all sorts of numbers thrown around. One minute, someone’s telling you that you only need a 5% deposit. The next, it’s suddenly 25%. It can get pretty confusing, and you’re left wondering—what’s the real deal?
Don’t worry, you’re not alone. There’s a lot of mixed information out there, and it’s easy to feel lost.
This blog will clear things up for you. By the time you’re done reading, you’ll know exactly when a 5% deposit applies, when you’ll need 25%, and what it all means for your home-buying journey.
What Is a Property Deposit?
When you’re buying a house, the deposit is the chunk of money you pay upfront. It’s your contribution toward the property’s price, and the rest is usually covered by a mortgage. For example, if you’re buying a home worth £200,000 and you’re putting down a 10% deposit, that means you’re paying £20,000 upfront while the mortgage covers the remaining £180,000.
The bigger your deposit, the less you need to borrow and that usually means better mortgage rates. Lenders see you as less of a risk when you’ve got more of your own money in the game.
But here’s where things get interesting: not all deposits are equal. How much you need to put down depends heavily on what kind of property buyer you are. Are you planning to live in the home yourself? Or are you buying it to rent out to someone else?
That difference changes everything.
Buy to Live Property: The 5% Rule
If you’re planning to buy a home to live in, here’s the good news—you might only need a 5% deposit. That’s right. Thanks to various government-backed schemes and lender offers, first-time buyers and even home movers can access 95% loan-to-value (LTV) mortgages. That means the lender covers 95% of the property price, and you just need to bring the remaining 5%.
Let’s say you’re eyeing a £250,000 home. With a 5% deposit, you’d only need £12,500 upfront. Sounds much more doable, right?
But here’s what you should know: 5% is the minimum, not the standard. In many cases, lenders will ask for up to 10%, depending on your credit history, income, and the type of property you’re buying. So while 5% is possible, you’ll often find yourself needing a bit more especially if you’re not using any government schemes.
Remember, a lower deposit often comes with slightly higher monthly repayments and less favourable interest rates—just something to keep in mind while budgeting.
Still, if you’re aiming to get on the property ladder and live in the home, starting with a 5–10% deposit can be a realistic and achievable goal.
Buy to Let Property: The 25% Rule
Now, if you’re thinking about buying a property to rent out whether it’s a long-term investment or your first step into becoming a landlord, the deposit requirements are very different.
In most cases, you’ll need at least a 25% deposit for a buy-to-let mortgage. That means if the property costs £200,000, you’re expected to put down £50,000 upfront. But why is there such a huge difference compared to residential mortgages?
Well, from a lender’s perspective, buy-to-let is riskier. You’re not living in the property, so the assumption is that you’re relying on rental income to repay the loan. If there’s a void period (no tenants) or rent doesn’t cover the mortgage, it could cause issues. So they ask for a bigger deposit to reduce that risk.
Even though the upfront cost is higher, the long-term income potential and property appreciation can make it worthwhile if it’s done right. But the key thing is this: buy-to-let requires more cash upfront, and it’s not something you can jump into with a small deposit.
How to Decide Which Route Is for You: Buy to Let or Buy to Live?
Whether you choose to buy a home to live in or invest in one to rent out, it all comes down to your personal goals. If you’re looking for a property that will earn you passive income and serve as a long-term investment opportunity, then buy-to-let is the way to go. It’s ideal if you’re thinking about building wealth through property and you’re comfortable putting down a higher deposit to get started.
But if you just want a place to call your own—a space to settle into without worrying about tenants or rental income—then buying to live in is more suitable. Especially if you’re not too concerned about making money from the property, and you’re working with a smaller deposit.
And if you’ve been considering the buy-to-let route but you’re unsure where to start, we’re here to help. You don’t have to figure it out alone. Book a free discovery call with us today, and let’s get started on your property investment journey.
