Financing a House Purchase: Your Guide to Mortgages, Deposits, and Schemes
Published 12th of December 2013·Updated 18 April 2026
Reviewed by: Reviewed for accuracy April 2026
Financing a house purchase in the UK means securing a mortgage from a lender, putting down a deposit, and meeting the lender's affordability checks. The larger your deposit, the better the mortgage rates available to you. Most lenders want to see a deposit of at least 5 per cent of the purchase price, though 10 to 20 per cent gives you access to significantly cheaper deals.
Short Summary
Most UK mortgages run for 25 years, though terms of 30 or 35 years are increasingly common as house prices have risen. A longer term reduces monthly payments but increases the total interest you pay.
Lenders assess affordability based on your income, outgoings, and credit history. They will stress-test your ability to repay at a higher interest rate than the one you are offered, typically 3 percentage points above the current rate.
Government schemes have changed significantly in recent years. As of 2026, the Mortgage Guarantee Scheme allows first-time buyers to purchase with a 5 per cent deposit. Check the government's own website (gov.uk) for the most current scheme availability.
If you are self-employed or have a complex income, you may need a specialist mortgage broker to find a lender willing to offer the amount you need.
How much deposit do I need to buy a house?
The minimum deposit for most residential mortgages in the UK is 5 per cent of the purchase price. On a £250,000 property, that is £12,500. However, mortgages at 95 per cent loan-to-value (LTV) carry the highest interest rates. Moving to a 10 per cent deposit (90 per cent LTV) typically unlocks substantially cheaper deals, and a 20 per cent deposit (80 per cent LTV) offers the best mainstream rates.
Saving a larger deposit also reduces your monthly mortgage payment and the total cost of the loan over its term. According to UK Finance, the average first-time buyer deposit in 2024 was around 22 per cent, though this varied significantly by region - buyers in London tend to need considerably more than those in the North of England or Wales.
| Deposit | LTV | Rate availability |
|---|---|---|
| 5% | 95% LTV | Limited lenders, highest rates |
| 10% | 90% LTV | Wider choice, moderate rates |
| 15% | 85% LTV | Good choice, competitive rates |
| 20%+ | 80% or lower | Best rates available |
What types of mortgage are available?
Repayment mortgages are the most common type. Each monthly payment covers both the interest and a portion of the loan, so by the end of the term you own the property outright. Most lenders and advisers recommend this type.
Interest-only mortgages require you to pay only the interest each month. The loan itself does not reduce. At the end of the term, you must repay the full amount you borrowed - usually by selling the property or using savings. These are now mainly available to buy-to-let investors or those with large deposits.
Fixed-rate mortgages lock your interest rate for a set period - typically two, three, or five years. Your payments stay the same during the fixed period regardless of Bank of England base rate changes.
Tracker mortgages move in line with the Bank of England base rate plus a set margin. Your payments rise when rates go up and fall when they go down.
How does a mortgage application work?
Before you start viewing properties, it is worth getting a mortgage in principle (also called an agreement in principle or AIP). This is a conditional offer from a lender confirming how much they would lend you, based on a soft credit check. Estate agents and sellers take buyers more seriously if they can show a mortgage in principle.
When you make a formal application, the lender will carry out a full credit check, verify your income and outgoings, and instruct a valuation of the property. The FCA requires lenders to assess whether you can afford the mortgage both now and if interest rates were to rise. This process typically takes two to six weeks.
Are there government schemes to help first-time buyers?
Government support for first-time buyers has changed frequently. The Help to Buy Equity Loan scheme closed to new applicants in 2023. As of 2026, the Mortgage Guarantee Scheme allows buyers to purchase with a 5 per cent deposit on properties up to £600,000. The government guarantees a portion of the lender's risk, making 95 per cent LTV mortgages more widely available.
Shared ownership allows you to buy a share of a property (typically 25 to 75 per cent) from a housing association and pay rent on the remainder. You can buy additional shares over time (known as staircasing). This option reduces the deposit and mortgage you need but comes with restrictions on selling and modifications.
Check gov.uk/help-to-buy for the current list of active schemes, as these change regularly.
What is a buy-to-let mortgage and how is it different?
A buy-to-let mortgage is specifically for properties you intend to rent out rather than live in. Lenders assess affordability differently: they typically want the rental income to cover 125 to 145 per cent of the monthly mortgage payment. Buy-to-let mortgages usually require a minimum 25 per cent deposit and carry higher interest rates than residential mortgages.
Do not attempt to rent out a property on a standard residential mortgage without informing your lender. This is a breach of your mortgage terms (known as consent to let) and can result in the lender demanding immediate full repayment. If you need to rent out your home temporarily - for example, because of a work relocation - contact your lender first. Many will grant consent to let for a defined period.
Should I use a mortgage broker?
A whole-of-market mortgage broker has access to deals from across all lenders, including those that do not deal directly with the public. They can identify the most suitable deal for your specific circumstances and handle much of the paperwork. Most brokers charge a fee (typically £300 to £500) or take commission from the lender, or both.
For straightforward cases - good credit, standard employment, reasonable deposit - you may be able to go directly to a high-street lender such as Barclays, Halifax, HSBC, or Nationwide. For anything more complex, a broker is usually worth the cost.
Frequently Asked Questions
How long does it take to get a mortgage?
From application to mortgage offer typically takes two to six weeks, depending on the lender and how quickly you can provide the documentation they request. Conveyancing (the legal process of transferring ownership) usually takes a further six to twelve weeks. Budget for three to four months from accepted offer to completion.
Can I get a mortgage with bad credit?
Yes, though your options are more limited and rates are higher. Some specialist lenders - including Pepper Money, Kensington, and Aldermore - cater to borrowers with defaults, CCJs, or a history of missed payments. A mortgage broker who specialises in adverse credit cases will know which lenders are most likely to accept your application.
What is stamp duty and when do I pay it?
Stamp Duty Land Tax (SDLT) is payable on properties above a certain value in England and Northern Ireland (Land and Buildings Transaction Tax in Scotland; Land Transaction Tax in Wales). First-time buyers pay no SDLT on properties up to £300,000 (as of 2025). Check the current thresholds at gov.uk/stamp-duty-land-tax.
What other costs should I budget for when buying a house?
Beyond the deposit, budget for: solicitor/conveyancing fees (£1,000-£2,500), survey costs (£400-£1,500 depending on type), mortgage arrangement fee (£0-£2,000 depending on deal), and removal costs. Stamp duty may also apply depending on the purchase price and your buyer status.
What happens if I cannot keep up with mortgage payments?
Contact your lender immediately if you are struggling. Lenders are required by the FCA to treat you fairly and must consider options such as a payment holiday, reduced payments, or extending your mortgage term before taking possession action. StepChange (0800 138 1111) can also provide free advice if your finances more broadly are under pressure.