When buying a property, it is easy to assume that putting down the biggest deposit possible will always get you a better mortgage.
A larger deposit can often help you access lower mortgage rates because it reduces your loan-to-value (LTV). However, mortgage pricing normally works in LTV bands, which means adding another £5,000 or £10,000 to your deposit won’t necessarily change the mortgage rate available.
In some cases, reaching the next LTV threshold could make a meaningful difference. In others, you could put considerably more money into the property without improving the mortgage deal at all.
So, how much difference does a bigger deposit actually make?
Quick Answer: Does a Bigger Deposit Mean a Lower Mortgage Rate?
Often, yes. A bigger mortgage deposit can give you access to lower interest rates because you are borrowing a smaller percentage of the property’s value.
For example, reducing your mortgage from 90% LTV to 85% LTV may open up a different range of mortgage products.
However, mortgage rates are generally priced within LTV bands. If increasing your deposit only takes you from 88% to 87% LTV, for example, you may remain within the same mortgage product range and see no improvement in the rate.
The important question isn’t simply how big your deposit is, but whether putting down more money would move you into a better LTV band and whether the potential mortgage saving justifies using more of your cash.
What Is Loan-to-Value (LTV)?
Loan-to-value is the percentage of a property’s value that you are borrowing through your mortgage.
For example, imagine you are buying a property for £500,000.
If you have a £50,000 deposit:
Property price: £500,000
Deposit: £50,000
Mortgage: £450,000
LTV: 90%
If you instead put down £75,000:
Property price: £500,000
Deposit: £75,000
Mortgage: £425,000
LTV: 85%
You have moved from a 90% LTV mortgage to an 85% LTV mortgage.
That distinction can matter because mortgage lenders frequently offer different products at different LTV levels.
What Are the Main Mortgage LTV Bands?
Mortgage products are commonly available around LTV levels such as:
- 95% LTV
- 90% LTV
- 85% LTV
- 80% LTV
- 75% LTV
- 60% LTV
Not every lender uses exactly the same bands, and product availability can change.
Generally, a lower LTV represents less lending risk because the borrower has more equity in the property. This is one reason lower-LTV mortgages can sometimes come with more competitive interest rates.
For a buyer, the useful question is whether your deposit places you close to one of these thresholds.
How Much Deposit Do I Need for a Mortgage?
Many buyers will typically need a deposit equivalent to at least 5% of the property’s purchase price, although some mortgage products require a larger deposit and eligibility will depend on your circumstances. MoneyHelper’s general guidance is that buyers will usually need a deposit of at least 5% to 10%.
For example:
| Property Price | 5% Deposit | 10% Deposit | 15% Deposit | 25% Deposit |
|---|---|---|---|---|
| £300,000 | £15,000 | £30,000 | £45,000 | £75,000 |
| £500,000 | £25,000 | £50,000 | £75,000 | £125,000 |
| £750,000 | £37,500 | £75,000 | £112,500 | £187,500 |
| £1,000,000 | £50,000 | £100,000 | £150,000 | £250,000 |
These figures simply illustrate the deposit required at each percentage. They don’t mean a particular mortgage will be available at that LTV.
Is It Worth Putting Down a Bigger Deposit?
It depends on what the additional deposit actually achieves.
Suppose you are buying a £500,000 property and have £65,000 available for your deposit.
A £50,000 deposit gives you:
£450,000 mortgage ÷ £500,000 property value = 90% LTV
Putting down £60,000 instead would reduce the mortgage to £440,000:
£440,000 ÷ £500,000 = 88% LTV
You’ve contributed another £10,000, but you may still be looking at products within the same broad LTV range.
However, increasing the deposit to £75,000 reduces the mortgage to £425,000:
£425,000 ÷ £500,000 = 85% LTV
You have now reached another significant LTV threshold, potentially opening up a different range of mortgage products.
This is why buyers should look at the LTV their deposit creates, rather than considering the deposit amount in isolation.
Does Going From a 10% to 15% Deposit Make a Difference?
Potentially, yes. A 10% deposit means you require a 90% LTV mortgage, while a 15% deposit reduces this to 85% LTV.
Lowering the LTV can potentially:
- give you access to different mortgage products
- reduce the interest rate available
- reduce the amount you need to borrow
- reduce monthly repayments
- reduce the total interest payable
But it doesn’t automatically mean using the larger deposit is the right financial decision.
You also need to consider what happens to the money you have left after completion.
Should I Put All My Savings Into My Mortgage Deposit?
Not necessarily.
Buying a home involves more than finding the deposit.
Depending on your circumstances, you may also need money for:
- Stamp Duty
- solicitor/conveyancing costs
- survey or valuation costs
- mortgage and broker fees
- moving costs
- furniture
- repairs or renovation
- an emergency cash reserve
Suppose putting another £20,000 into your deposit moves you into a better LTV band and materially improves the mortgage available. That may be worth considering.
But if the additional £20,000 doesn’t change the mortgage product or rate and leaves you with virtually no savings after completion, the decision is much less obvious. There isn’t a universal “perfect” deposit percentage.
Does a Bigger Deposit Increase How Much I Can Borrow?
A bigger deposit reduces the amount you need to borrow, but it doesn’t automatically increase the maximum mortgage a lender will offer you.
Your maximum borrowing is normally determined by the lender’s affordability assessment, which can take account of factors including:
- income
- regular financial commitments
- loans and credit cards
- dependants
- mortgage term
- interest-rate stress testing
- employment and income structure
- credit history
- lender-specific affordability criteria
Imagine a property costs £700,000 and a lender’s affordability assessment says the maximum mortgage available to you is £550,000.
You would need at least £150,000 from your own funds to bridge the difference, irrespective of whether a higher-LTV mortgage theoretically exists.
Deposit and affordability therefore work together, but they are not the same thing.
Can a Bigger Deposit Help If Mortgage Affordability Is Tight?
Yes, but primarily because it reduces the amount you need to borrow.
For example:
Property: £600,000
Deposit: £60,000
Mortgage required: £540,000
If affordability only supports a mortgage of £500,000, there is a £40,000 shortfall.
Increasing the deposit to £100,000 would reduce the mortgage requirement to £500,000.
In this scenario, the larger deposit isn’t persuading the lender to lend more.
It is doing the opposite: reducing the amount the borrower needs from the lender.
That distinction is important.
Is a 40% Deposit Better Than a 25% Deposit?
Not necessarily from a mortgage-rate perspective.
A 40% deposit produces a 60% LTV mortgage, while a 25% deposit produces a 75% LTV mortgage.
There may be more competitive products available at 60% LTV, but the difference in rate needs to be considered alongside the additional cash required.
On a £1 million property:
25% deposit: £250,000
Mortgage: £750,000
LTV: 75%
Compared with:
40% deposit: £400,000
Mortgage: £600,000
LTV: 60%
That’s an additional £150,000 being put into the property.
For some borrowers, reducing the mortgage and monthly payment will be the priority.
For others, particularly higher earners or clients with other financial objectives, retaining some of that capital may be important.
This is where the decision becomes much more personal than simply asking which LTV has the lowest mortgage rate.
Could I Put Down a Smaller Deposit and Overpay Later?
Potentially.
Some borrowers prefer to retain more cash when buying and then make mortgage overpayments later.
However, you should check the terms of the mortgage carefully. Many mortgage products limit how much can be overpaid without triggering an early repayment charge (ERC) during the initial deal period.
There is also no guarantee that taking a higher-LTV mortgage today and overpaying later will be cheaper than using a larger deposit from the outset.
The two options need to be compared properly.
Does My Deposit Affect the Mortgage Rate When Remortgaging?
For an existing homeowner, the equivalent of your deposit is the equity in your property.
For example:
Property value: £600,000
Mortgage outstanding: £420,000
Your LTV is:
£420,000 ÷ £600,000 = 70% LTV
If your mortgage balance reduces or the property’s value increases, your LTV may fall.
That can potentially move you into a different LTV band when you remortgage.
This is one reason homeowners approaching the end of a fixed deal should look at both their outstanding mortgage balance and a realistic estimate of the property’s current value.
Oportfolio Insight
One of the things we look at when arranging a mortgage is whether changing the deposit slightly could materially improve the options available.
If a client is just above an important LTV threshold, contributing a relatively small additional amount could potentially open up another range of mortgage products. But simply putting as much cash as possible into a property isn’t automatically the right answer.
We look at the mortgage rate, fees, monthly payment, overall borrowing requirement and how much money the client would retain after completion. The objective is to structure the mortgage around the client’s wider circumstances rather than simply chase the lowest possible LTV.
Example: When a Slightly Bigger Deposit Could Matter
Imagine a buyer purchasing a £750,000 London property.
They initially plan:
Deposit: £105,000
Mortgage: £645,000
LTV: 86%
If they could increase the deposit to £112,500, the mortgage requirement would fall to £637,500 and the LTV would become exactly 85%.
That’s only an additional £7,500 deposit, but it crosses an LTV threshold.
Whether doing so actually produces a better mortgage would depend on the products available at the time, lender criteria and the client’s circumstances.
But this is precisely the kind of calculation worth making before submitting the mortgage application.
Key Takeaways
- A bigger deposit can often give you access to better mortgage rates by reducing your LTV.
- Mortgage pricing commonly operates in LTV bands, so adding more deposit won’t always improve your rate.
- Moving from 90% to 85% LTV could be more significant than moving from 89% to 87%.
- A bigger deposit reduces the amount you need to borrow but doesn’t automatically increase a lender’s affordability limit.
- Putting every available pound into your deposit isn’t necessarily the best option if it leaves you without sufficient money for fees, moving costs or emergencies.
- Existing homeowners should consider their LTV when remortgaging because additional equity can potentially open up different products.
- The most useful calculation is often how much additional deposit is required to reach the next relevant LTV band.
In Summary
A bigger deposit can get you a better mortgage rate, but more isn’t automatically better.
What matters is the loan-to-value created by your deposit and whether putting additional money into the property moves you into a more competitive LTV band.
If you’re close to an LTV threshold, a relatively small change to your deposit could potentially make a meaningful difference. If you’re comfortably within the same band, adding more money may not change the mortgage rate at all.
Before deciding how much deposit to use, it makes sense to compare the mortgage options at different LTV levels alongside the amount of cash you want to retain after buying.
Not Sure How Much Deposit to Put Down?
If you’re buying a property and have flexibility around your deposit, Oportfolio can compare how different deposit amounts could affect your LTV, mortgage options, monthly repayments and overall costs.
This can be particularly valuable if you’re close to an LTV threshold or deciding whether to put more money into the property or retain some of your savings.
Speak to Oportfolio Mortgages to understand how your deposit could affect your mortgage options.
