How much deposit do you need to buy a house?
5%, 10% or 20%? How the size of your deposit changes the monthly payment, the interest over the term and the rate you are offered, with a worked example.
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Tools for this job: Mortgage Calculator · Compound Interest Calculator · Percentage Calculator
The deposit, or down payment, is the part of the price you pay yourself; the mortgage covers the rest. Lenders in many countries will accept as little as 5%, and sometimes less. But the size of the deposit affects much more than the loan amount: it changes the rate, the monthly payment and, in some countries, whether you pay for extra insurance.
What different deposits mean
For a home priced at 300,000, at 6% interest over 25 years, the monthly payment and the total interest over the term are:
| Deposit | Monthly | Interest |
|---|---|---|
| 5% (15,000) | 1,836 | 265,878 |
| 10% (30,000) | 1,740 | 251,884 |
| 20% (60,000) | 1,546 | 223,897 |
These figures assume the same 6% rate for every deposit. In practice, a bigger deposit usually earns a lower rate as well, which widens the gap further.
Why 20% is a common target
- United States: with less than 20% down on a conventional loan, lenders usually add private mortgage insurance (PMI), which protects the lender, not you, and adds to the monthly payment until you build enough equity.
- United Kingdom and elsewhere: rates are priced in loan-to-value bands. Moving from a 95% to a 90% or 85% loan-to-value band often unlocks noticeably cheaper rates.
- Everywhere: a larger deposit gives a cushion if prices fall, so you are less likely to owe more than the home is worth.
The Mortgage Calculator flags a deposit under 20% for this reason, and shows the monthly payment with property tax and insurance included.
The case for a smaller deposit
Waiting years to save 20% has a cost too: rent paid in the meantime, and house prices that may rise faster than your savings. If rent is close to what a mortgage would cost, buying sooner with 10% can make sense. There is no universal right answer; compare the monthly cost and total interest for the deposits you could realistically have, and when.
Deposit and loan-to-value
Lenders describe the same thing from the other side, as loan-to-value (LTV): the loan as a percentage of the property's value. A 10% deposit means a 90% LTV; a 25% deposit, 75% LTV. Rate tables are usually arranged by LTV band, so if you are just short of a band, a slightly bigger deposit can lower the rate on the whole loan. Check where the band edges are before you decide how much to put down.
Budget for more than the deposit
- Purchase taxes and duties, which vary widely by country and price.
- Legal, survey, valuation and arrangement fees.
- Moving costs and immediate repairs or furniture.
- An emergency fund, so the first broken boiler does not go on a credit card.
How long will it take to save?
The Compound Interest Calculator shows how a regular monthly saving grows with interest. Enter your savings rate and the deposit target to see roughly how many years it takes, and how much a higher monthly amount would shorten it.
For what makes up the monthly payment beyond the loan itself, see what goes into a mortgage payment.