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How Much Deposit do I Need?

How Much Deposit do I Need?

A Guide to Deposits for Renting and Buying a Property

Moving into a new property should be an exciting experience, but it is not without its challenges. Anyone who has been through the process of buying their own home, whether they take out a mortgage or not, will know that there is a lot more to the process than it often seems from the outside. As well as the logistical challenges of moving house, there are also various financial considerations that must be taken into account.

No matter what kind of property you move into, there is nearly always going to be some kind of deposit that you have to pay. Here’s everything that you need to know about deposits for buying or renting a property.

What Is A Deposit?

There are various forms of deposit that you might be asked to pay when moving into a property, but they all serve essentially the same function. Money paid as a deposit can either be used to cover some of a larger payment with the rest then being paid in instalments, or it can be held by a landlord for security, in which case you will usually get it back later.

How Much Deposit Do I Need For A House?

Before you can start seriously looking at properties with a view to moving in, you will need to put aside enough money for a deposit. “How much deposit do I need?” is one of the most common questions that first-time buyers have, and unfortunately, there isn’t a simple universal answer. In general, you can expect to put down between 5% and 20% of the value of the property that you want to buy. The more money you are able to put aside for a deposit, the more mortgage deals are available to you.

If you are planning on renting rather than buying, you will still usually have to pay a deposit, along with a number of other upfront costs. For example, most landlords will want you to pay the first month or two of rent upfront (note that this is separate from the deposit that you will also pay). If you find the property via a lettings agency, then they will often ask you to put down a holding deposit. Make sure that you ask about any upfront payments early on in the process, so you can properly budget for your move.

It is common for renters to pay the first couple of months of rent in advance when they move in. If you have a low credit score or there are any other question marks surrounding your ability to pay, then your landlord might ask you to pay several months’ rent upfront as a security measure. In addition to these payments, you might also have to put down a tenancy deposit.

A tenancy deposit is usually the equivalent of a months’ rent. Legally, landlords can only charge you the equivalent of five weeks’ rent for your tenancy deposit, although this rises to six weeks if your annual rent exceeds £50,000. When you move out of the property, the money will be returned to you, provided you haven’t breached the terms of your tenancy or caused any damage. If you have damaged the property or you still owe your landlord money, they can keep some of the deposit as compensation.

All deposits must be placed in a government-approved deposit protection scheme.

Holding Deposit

A holding deposit is a deposit that you pay to a letting agent. They keep this until they have conducted all of the necessary checks they need to do to ensure that you are a suitable tenant. If you have paid a holding deposit to a letting agent, then they can’t rent the property to someone else in the meantime. Assuming that all of their checks come back ok and you are approved as a tenant, you will either get your holding deposit back or it will be deducted from the cost of your tenancy deposit or advance rent.

You shouldn’t pay a holding deposit unless you are sure that you want to move into the property. Not only does your holding deposit mean that no one else can be shown the property by the letting agent, but if you change your mind and don’t move in, then you might not get your holding deposit back.

How Much Deposit Do You Need For A Mortgage?

Exactly how much deposit you will need for a mortgage will vary but is usually around 20% for a first-time buyer. So, if the house you are looking at is £200,000, you will need to stump up £20,000 as a deposit. Obviously, this is a pretty big ask for many people, but there are a number of things you can do to make it more financially viable.

What To Do If You Don’t Have Enough Money for a Deposit

  • Ask your parents for support: Many first-time homebuyers turn to their parents for financial support when they are getting together their initial deposit. Borrowing money from your parents is less stressful than approaching a bank or another lender. You do not have to worry about the ramifications to your credit score if you are unable to keep up with your scheduled repayments, not unless you have very strict parents, of course.

As well as lending you money directly, your parents can also act as guarantors on any loan you take out. A guarantor is essentially someone who agrees to make loan repayments for you if you are unable to. Lenders and landlords like guarantors because they provide a little extra security on a loan.

  • Club together with friends or housemates: If you are planning on moving into your new property along with some other people, you can all pool your resources together to reduce the individual burden that you each take on. Lots of people go down this route, but many people fail to account for potential ownership issues down the line. If you have multiple people all paying for a stake in a property, it’s important that everyone is clear on how much of it they own. Dividing it equally amongst yourself is going to be the easiest option, but you can work it out between you.

If you sell the property in the future, every stakeholder can take a cut of the sale equal to their stake in the home. If there are four of you living together and you sell the home for £250,000, then you would each receive £62,500.

  • Shared ownership: While the term shared ownership might sound like it describes what we have outlined above, it is actually a little different. If you have a total household income of less than £80,000 a year (£90,000 if you live in London), then you might be able to pay for part of a home and rent the rest. In doing this, you can reduce the cost of your mortgage and, therefore, the size of the deposit that you’ll need. However, you will also have to pay rent.

Zero Deposit Properties

A zero deposit scheme offers home buyers an alternative to the conventional cash deposit and can significantly reduce the upfront costs of moving into a new home. There are benefits for the landlord as well as the tenant, so no deposit rental properties are becoming more common than many people realise. It isn’t just buyers that can take advantage of zero deposit schemes; a property with no deposit to rent London, for example, will enable a renter to bring their moving costs down by removing the need for a deposit.

We have a range of properties available on our books with zero deposit to rent. These are a great option for anyone who wants to move to the London area. London is a notoriously expensive city to live in, so no deposit flats to rent and no deposit houses to rent both present more affordable options for many renters looking to make the city their home.

There is a wide range of costs that you need to account for when you are budgeting for a new property. Whether you are buying the property outright, applying for a mortgage, or renting the place, you will almost always need to pay a deposit of some kind. If you opt to take advantage of a zero deposit scheme instead, then remember that there is still a whole host of other costs you will need to account for.

Whenever you put down a deposit for a property, irrespective of the circumstances, it is essential that you get a receipt for the money and that you make sure your landlord or letting agent gives you all the necessary paperwork. This paperwork will record how much you have paid for a deposit, where it is being kept, and the terms under which it will be returned to you. If you have any concerns about a deposit that you have paid or you are struggling to get details from your letting agent or landlord, you should contact your local Citizens Advice Bureau.

How Much is a Flat Deposit in London?

Most first-time buyers are expected to find a deposit of at least 20% of the asking price of the property that they want to buy. To work out how much of a deposit you will need for a flat in London, it’s a good idea to take a look at the properties available to find a price that you can afford and is realistic for the area of London that you want to live in.

How Much is a Deposit to Rent a Flat?

There are several options to consider if you believe that saving for a full deposit might be difficult for you, including Shared Ownership and Rent to Buy properties. Some tips to keep in mind to improve your deposit savings include:


While budgeting is never a fun subject, it is a very useful tool for anybody saving a large amount of money such as a house deposit. Setting a budget means working out your total household income and subtracting any essential bills and expenses. Then, work out what you have left for saving and spending elsewhere. Setting a budget will usually mean that you need to be focused and there will often be sacrifices that you need to make in order to ensure that you can save more. It is worth shopping around to get cheaper prices for your essential expenses, or even moving in with family or to a cheaper place while you save.

Choose the Right Savings Account:

If you work out that you are likely going to need to save money over a period of time that totals over two years for your house deposit, you could consider opening a savings bond rather than regular savings account to put your money in. This will pay a higher rate of interest on your savings; however, you will not have instant access to the funds. If you choose this option, it’s a good idea to have two separate savings funds that include the savings bond for your deposit and another for emergencies that you can easily access when you need it. Being unable to access the savings in your bond might be a good thing when saving for a house deposit as it will remove any temptation to spend the cash. Generally, the longer you save, the higher the rate of interest you will get.

Move Back With Family:

The cost of renting is often just as much as paying for a mortgage, if not even more, making it difficult for you to put extra money aside to save up for your house deposit. Moving out of your own place and living with family again for a while can be a difficult decision that might not always be possible for everybody, but it is definitely worth considering if you are able to do this. Living with your mum and dad for a while might not be the most ideal set-up, but it can certainly pay off by freeing up the amount of money that you would normally spend on rent.

Consider Shared Accommodation:

If you’re unable to save money on rent by moving back in with your family, it could be worth looking for cheaper rental accommodation such as a shared house. Shared houses are often cheaper to rent compared to full property and will free up a lot of the money that you are currently spending on rent. Living with housemates usually means that while you do have your own living space you will be required to share facilities such as the kitchen or bathroom.

Get a Housemate:

If you are currently renting and have a spare room in your home, it might be worth speaking to your landlord to see if it’s possible to move a housemate or lodger into the extra space. A housemate can help you out financially by contributing to your rental payments or bill payments, which in turn frees up extra money for you to put towards your deposit savings. This is often an ideal alternative to moving into shared housing since it means that you can stay in your current living space for longer and your landlord might be happy to allow you to move a friend or family member in who you already know and trust, rather than living with strangers.

Find a Side Gig:

If your current income leaves you with little to put towards a deposit and you want more cash to save up faster, you can find a side hustle to earn more income that you’ll be able to save over time. There are plenty of self-employed and freelance job ideas that you can turn to in your spare time to make more money towards a deposit, including courier delivery jobs and online work like website design, copywriting, virtual admin jobs, buying and selling on sites like eBay and more.

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