5% vs 10% vs 15% Deposit in 2026: How Much Does a Bigger Deposit Save?

The deposit decision every first-time buyer faces

You can buy a home in 2026 with a 5 percent deposit. That does not mean you should, if you can stretch a little further. The size of your deposit sets your loan-to-value band, and that band largely determines the interest rate a lender will offer you. The gap between a 95 percent mortgage and a 90 percent one can change your monthly payment noticeably, and your total interest over the life of the loan considerably.

But there is a cost to waiting. Saving the extra 5 percent takes time, often while you are paying rent, and house prices do not stand still. The right call is a genuine trade-off, not a slogan, and it is worth doing the arithmetic for your own target price.

What loan-to-value actually means

Loan-to-value, or LTV, is your mortgage as a percentage of the property's value. Put down 10 percent and you borrow 90 percent, so your LTV is 90 percent. Lenders see a lower LTV as lower risk, because there is more of your money cushioning them if prices fall, so they reward it with cheaper rates.

Rates are tiered by band, with the common thresholds at 95, 90, 85, 80 and 75 percent. The important practical point is that the savings come in steps, not smoothly. Moving from 91 to 90 percent can drop you into a cheaper band and unlock a better rate, while moving from 90 to 89 percent within the same band may change little. The thresholds are where the value sits.

Worked example: a £300,000 home

Take a £300,000 property, a common first-time-buyer price point. Here is what each deposit looks like.

Two things change as the deposit grows. First, the loan shrinks, so even at the same rate you pay less interest. Second, and more powerfully, the rate itself usually falls as you cross into each cheaper band.

Mortgage rates move constantly and vary by lender, so this article does not quote a specific rate as fact. Check current rates for each LTV band when you are ready to buy. But the structure is reliable: 90 percent deals are typically cheaper than 95 percent deals, and 85 percent cheaper still, with the largest single step often coming as you move off the riskiest 95 percent tier.

The compounding effect of a lower rate

A smaller loan at a lower rate compounds into real money. Even a modest rate reduction across a £270,000 mortgage over a 25 or 30-year term adds up to thousands, sometimes tens of thousands, in interest over the full term. The bigger deposit also reduces the loan you are paying that rate on, so the two effects stack.

That is why the move from a 5 percent to a 10 percent deposit is often the highest-value single step a first-time buyer can make. You leave the most expensive band and shrink the loan at the same time.

The cost of waiting to save more

The counterweight is time. Saving an extra 5 percent of a £300,000 home means finding another £15,000. If you can save, say, £750 a month towards it, that is roughly twenty months of additional saving.

During those months, three things happen. You keep paying rent rather than building equity. House prices may rise, which increases the deposit you need in absolute terms and can offset your saving. And your situation, rates, and the market may all change.

So the question becomes: does the rate saving from a bigger deposit outweigh the extra rent and price risk of waiting to build it? If you can reach the next band quickly, the answer is usually yes. If hitting it would take years of additional saving while prices climb, buying sooner with a smaller deposit may be the better real-world outcome, even at a higher rate.

Stamp duty does not change with your deposit

A common misconception is that a bigger deposit reduces stamp duty. It does not. Stamp duty is charged on the purchase price, regardless of how you fund it.

For first-time buyers in England and Northern Ireland in 2026/27, the rates are 0 percent up to £300,000 and 5 percent on the portion between £300,000 and £500,000. On a £300,000 home, a qualifying first-time buyer pays no stamp duty at all. The standard residential bands, which apply if you are not a first-time buyer, are 0 percent to £125,000, 2 percent to £250,000, 5 percent to £925,000, 10 percent to £1.5m and 12 percent above.

The key point: your deposit affects your mortgage rate and loan size, not your stamp duty. Budget for stamp duty separately, based on the price, not the loan.

Other costs that scale with the purchase, not the deposit

Alongside stamp duty, remember the fixed buying costs that a bigger deposit does not reduce: conveyancing fees, a mortgage valuation or survey, lender arrangement fees, and removal costs. These come out of your cash, so do not pour every last pound into the deposit and leave nothing for completion and moving in. A common mistake is hitting a deposit band exactly but then scrambling for the legal and survey fees.

A simple framework to decide

• Identify the LTV thresholds for your target price and check current rates for each band.
• Work out the cash needed to reach the next band down, for example moving from 5 to 10 percent.
• Estimate how long that extra saving will take at your realistic monthly rate.
• Weigh the rate and interest saving against the extra rent and the risk that prices rise while you save.
• Keep a separate cash buffer for stamp duty, legal fees and moving, none of which your deposit reduces.

The bottom line

A bigger deposit does two things at once: it shrinks your loan and, by moving you into a cheaper loan-to-value band, lowers your rate. The jump from a 5 percent to a 10 percent deposit is usually the most valuable, because it lifts you off the most expensive 95 percent tier. But saving that extra 5 percent has its own cost in rent and price risk, so the right answer depends on how quickly you can bridge the gap. Run the numbers for your own price and current rates, and do not forget that stamp duty and fees are charged on the property, not the loan.

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