What you’ll learn
By the end of this step, you should be able to:
- Explain how deposit size affects loan-to-value and possible mortgage choices.
- Compare deposit sources, including savings, a Lifetime ISA and a gifted deposit.
The decision this lesson prepares you for: How much deposit do you need, and which route — saving, a LISA or a gift — gets you there?
Your deposit size sets your loan-to-value ratio, and LTV is the single biggest lever on the mortgage rate you will be offered. This step sets a deposit target expressed as an LTV band, chooses the right savings vehicle — including the Lifetime ISA and its 25% government bonus — and handles family help properly.
LTV bands are cliff edges
Lenders price mortgages in bands: 95%, 90%, 85%, 80%, 75% and down to 60% LTV. Crossing a band boundary — say from 91% to 90% — can cut your rate meaningfully; moving within a band usually changes nothing. So a deposit target should be 'reach 90% LTV on a £280,000 home', not a round number picked in the abstract. The LTV calculator shows exactly how much more saving buys the next band.
The Lifetime ISA, honestly
A Lifetime ISA lets you save up to £4,000 per tax year with a 25% government bonus — up to £1,000 of free money annually. The catches: you must be 18–39 to open one, the account must be open at least 12 months before buying, the property must cost £450,000 or less, and withdrawing for anything other than a qualifying first home (or age 60) costs a 25% charge that eats into your own capital. A qualifying purchase must also be made with a mortgage and become your main residence, and your conveyancer requests the withdrawal, with completion expected within 90 days. For most first-time buyers under the price cap it is the best deal available; all of these conditions were confirmed against GOV.UK on 14 July 2026 — recheck them before relying on it.
Gifted deposits done properly
Family help is common and lenders accept it, but a gifted deposit must be a genuine gift, not a loan. The giver signs a letter confirming no repayment is expected and no stake in the property, and your conveyancer will run anti-money-laundering checks on the source of the funds. Warn your family about the paperwork early — surprise AML questions offend people.
| LTV band | Deposit on a £280,000 home | What it typically means |
|---|---|---|
| 95% | £14,000 | Fewest products, highest rates, strictest checks |
| 90% | £28,000 | Meaningfully better rates than 95% |
| 85% | £42,000 | Wider product choice, better pricing again |
| 75% | £70,000 | Most of the market open to you |
| 60% | £112,000 | The best headline rates lenders advertise |
Your action list
Practical tips
- The deposit planner calculator models your monthly saving with the LISA bonus applied.
- Keep the deposit in accounts you can evidence, not cash — provable history matters at underwriting.
What can go wrong
- A LISA used for a home above £450,000 gains nothing and the withdrawal charge costs you real capital — check your target market's prices against the cap first.
- Draining every account to hit the next LTV band leaves nothing for the £3,000–£5,000 of costs that arrive before completion.
- PropertySquares provides education, not financial or legal advice. Verify current rules and obtain advice for your circumstances before acting.
Check your understanding
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