When you start thinking about buying a home, one question hits quickly — how much cash do you need upfront?
The answer isn’t simply “20% of the purchase price,” though you’ll hear that often. The real figure depends on your country, loan type, and whether you qualify for a government assistance scheme.
This guide walks you through the numbers. By the end, you’ll know the minimum deposit required in the US, UK, Canada, and Australia, what happens if you have less saved, and how to stretch your savings further.
In the US, minimum deposits range from 0% (VA/USDA loans) to 3.5% (FHA) or 3% (conventional first-time buyer programs). In the UK, Canada, and Australia, 5% is the typical low-deposit threshold — but a 20% down payment eliminates mortgage insurance. Government schemes in each country can reduce or waive insurance, helping you buy with a smaller deposit. The right amount for you depends on your income, local property prices, and lender requirements.
What Is a House Deposit and Why Does It Matter?
A house deposit (called a down payment in the US and Canada) is the cash you pay upfront. The mortgage covers the rest.
Example: buying a $400,000 home with a 10% deposit means $40,000 down and a $360,000 loan.
Your deposit size matters because it:
- Determines whether you’ll be approved.
- Sets your loan-to-value ratio (LTV), which directly impacts your interest rate.
- Decides whether you’ll pay mortgage insurance — an extra ongoing or upfront cost.
A larger deposit reduces your loan balance, unlocks lower rates, and avoids insurance fees. A smaller deposit lets you enter the market sooner but increases your long-term borrowing costs.
The Standard Deposit Percentages Explained
The 5% Deposit — The Minimum for Most Buyers
In the UK, Canada, and Australia, 5% is typically the lowest standard deposit. In the US, some conventional loans allow 3% down for first-time buyers, while FHA loans require 3.5%. On a $400,000 home, a 5% deposit equals $20,000.
This minimum comes with trade-offs. Lenders view low-deposit borrowers as higher risk. In the US, Canada, and Australia, a sub-20% deposit triggers mortgage insurance. In the UK, it narrows your lender pool and often pushes up your interest rate.
The 10% Deposit — A Sweet Spot
Saving to 10% opens better deals and reduces insurance costs. In Canada, moving from a 5% to a 10% deposit cuts the CMHC mortgage default insurance premium from 4.00% to 3.10% of the loan. In Australia, LMI premiums drop. A 10% deposit qualifies you for more competitive fixed rates In the UK. On a $400,000 home, a 10% deposit ($40,000) rather than 5% ($20,000) shrinks the loan by $20,000 and typically secures a 0.25%–0.5% rate improvement — saving $150–$250 per month over a 25-year term.
The 20% Deposit — The Gold Standard
A 20% deposit eliminates mortgage insurance in all four countries, gives access to the best rates and widest lender choice, and provides strong equity from day one. On a $400,000 home, that’s $80,000. For many first-time buyers, reaching 20% requires years of saving or family help — but it’s worth understanding why lenders reward it.
Country-by-Country Breakdown
United States
- Conventional loans: minimum 3% for first-time buyers (some programs), 5% otherwise.
- FHA loans: 3.5% with a credit score 580+; 10% if 500–579.
- VA loans: 0% deposit for eligible veterans.
- USDA loans (rural areas): 0% deposit.
Under 20% on a conventional loan, you’ll pay Private Mortgage Insurance (PMI), typically 0.5%–1.5% of the loan amount per year. On a $360,000 loan, that’s $1,800–$5,400 annually. PMI cancels automatically when your loan balance reaches 78% of the original home value. Many states offer down payment assistance — some as grants that never need repayment, others as forgivable loans if you live in the home for a set period. Check your state’s housing finance agency website.
United Kingdom
The minimum deposit for most mortgages is 5%. The UK’s Mortgage Guarantee Scheme supports 5% deals on homes up to £600,000 — check GOV.UK for current availability, as the scheme may be extended or replaced. First-time buyers in England and Northern Ireland currently pay no Stamp Duty Land Tax on properties up to £425,000 (threshold valid as of mid-2026). Always verify with HMRC. Scotland and Wales have separate land taxes and first-time buyer reliefs — check Revenue Scotland or the Welsh Revenue Authority. Budget for Stamp Duty as an upfront cost separate from your deposit.
Canada
Deposit tiers based on purchase price:
- Under CAD $500,000: 5% minimum.
- $500,000–$999,999: 5% on the first $500,000, 10% on the balance.
- $1 million or more: 20% required.
Deposits below 20% require CMHC mortgage default insurance, added to your mortgage balance. Premiums:
- 4.00% for a 5%–9.99% deposit.
- 3.10% for 10%–14.99%.
- 2.80% for 15%–19.99%.
Open a First Home Savings Account (FHSA) — contribute up to $8,000/year (lifetime max $40,000), with tax-deductible contributions and tax-free withdrawals for a home purchase. This is one of the best tools for first-time buyers right now.
Australia
Standard minimum deposit is 5%. Below 20% triggers Lenders Mortgage Insurance (LMI), a one-time premium that protects the lender, costing roughly $5,000 to $30,000+, depending on the price and deposit. You can often add LMI to your loan. The First Home Guarantee allows eligible first-time buyers to buy with a 5% deposit and no LMI, as the government guarantees up to 15% to the lender. Places are limited each financial year — apply early through an approved lender. Stamp duty varies by state; first-home buyer concessions are common. For example, NSW offers a full stamp duty exemption on homes up to $800,000 and concessional rates up to $1,000,000. Check your state revenue office.
How Much Deposit Do You Actually Need? A Simple Example
Sarah is buying a home in Melbourne, Australia, for AUD $600,000. She has saved AUD $45,000 — 7.5% of the purchase price.
Without any scheme, she needs to pay LMI of roughly $8,000 to $12,000 on top of her deposit.
With the First Home Guarantee: If eligible, the government covers the gap between her 7.5% and 20%, meaning she avoids LMI entirely, and her $45,000 goes straight to the deposit. (She still needs to budget for stamp duty and settlement costs.)
The difference is significant. Knowing which schemes you qualify for can save you thousands and change what you can afford.
Additional Costs to Save For (Beyond the Deposit)
Many first-time buyers get caught out by costs they didn’t budget for. Your savings target should always include:
- Stamp duty or land transfer tax (varies by country and state).
- Legal and conveyancing fees: typically $800–$2,500 (USD/AUD) or £1,000–£3,000 (UK).
- Building inspection or survey: $300–$700 (USD/AUD) or £400–£800 (UK).
- Mortgage application or valuation fees: vary by lender.
- Moving costs: $500–$3,000+ depending on distance.
- Initial repairs or purchases for the new home.
As a general rule, budget an extra 3% to 5% on top of your deposit to cover these costs comfortably.
Key Things to Check Before You Start Saving
Know Your Borrowing Capacity First
Before you set a savings target, get a rough idea of how much a lender will offer you. Use an online borrowing calculator based on your income, expenses, and existing debts. This tells you the price range of homes you can realistically consider — and therefore how large your deposit needs to be.
Check Your Credit File
In the US, a FICO score below 620 may disqualify you from the best low-deposit conventional programs and push you toward FHA loans with 3.5% down. In the UK, a poor credit history can mean lenders require a 10% or even 15% deposit. Check your credit report for errors, and plan to spend 6–12 months improving your score if needed.
Research Government Schemes Early
Don’t wait until your deposit is ready to look into assistance schemes. Many have eligibility criteria, income caps, property price limits, and limited places. Understanding them now shapes how much you need to save and which strategy makes sense for you.
Factor In Market Conditions
If property prices in your target area are rising quickly, your deposit target can become a moving goalpost. Knowing the local market trend helps you decide whether to buy now with a smaller deposit or wait and save more.
Common Mistakes First-Time Buyers Make With Deposits
Saving Toward the Deposit and Forgetting the Rest
The deposit is only one part of what you need. Many buyers reach their deposit target, get pre-approved, and then discover they don’t have enough left over for legal fees, inspection costs, and stamp duty. Always save for the full cost of buying, not just the deposit line item.
Assuming 20% Is the Only Option
Some buyers delay purchasing for years, chasing a 20% deposit when a government scheme or a 10% deposit with a competitive mortgage rate would have served them just as well. Run the numbers — sometimes buying earlier with a smaller deposit and paying LMI still works out cheaper than years of rent while you save.
Putting All Savings in a Standard Account
With high-yield savings accounts offering 4% APY or more in 2026, idle cash in a standard 0.01% account loses hundreds in potential interest. Use tax-advantaged accounts like the FHSA (Canada) or Lifetime ISA (UK) — the LISA adds a 25% government bonus on up to £4,000 saved per year, but you must have the account open for at least 12 months before buying. If a LISA fits your plan, open it now to start the clock.
Not Getting Pre-Approval Before Searching
Knowing your deposit amount is one thing. Knowing what a lender will actually offer you based on your full financial picture is another. Get a mortgage pre-approval before you start attending open houses. It prevents heartbreak over homes outside your real budget.
Practical Tips to Save Your Deposit Faster
- Open a dedicated savings account purely for your deposit — keep it separate from everyday spending.
- Automate a transfer to this account on the same day as each pay cycle.
- In the UK, open a Lifetime ISA (LISA) — the government adds a 25% bonus on up to £4,000 saved per year (first-time buyers under 40, property up to £450,000). You need the account open for at least 12 months to use the bonus, so start early.
- In Canada, open an FHSA immediately — contributions reduce your taxable income, and withdrawals for a home purchase are tax-free.
- Track your spending for 60 days before setting a savings target — most people find money they didn’t know they were losing.
- Consider a side income for 12 to 18 months dedicated entirely to the deposit fund.
- If the family wants to help, understand the gifted deposit rules. Most lenders require a signed gift letter confirming the money isn’t a loan. In Canada, gifts from immediate family are typically fine; in the UK, large gifts may have inheritance tax implications if the donor dies within seven years — consult a tax adviser.
FAQs
Can I buy a house with a 5% deposit?
Yes, in all four countries covered here — and in the US, you may qualify for programs requiring just 3% or even 0% down (VA/USDA). A 5% deposit usually triggers mortgage insurance unless you use a government guarantee scheme. The key is understanding the total cost, not just whether it’s technically possible.
Is it better to wait and save a bigger deposit, or buy now with a smaller one?
This depends on your market and personal numbers. If you’re renting at $2,000 a month, waiting a year to save a larger deposit costs $24,000 in rent — potentially more than the LMI premium you’d pay by buying now. Run a break-even comparison: add up mortgage insurance costs against the extra rent and potential price growth over your saving period. The answer is often more nuanced than people expect.
What is the difference between a deposit and a down payment?
They mean the same thing. “Deposit” is the more common term in the UK and Australia. “Down payment” is used in the US and Canada. Both refer to the portion of the purchase price you pay upfront, with the remainder covered by a mortgage.
Can I use a gifted deposit from my parents?
Yes, in most cases — but with conditions. Most lenders require a signed letter from the gifting party confirming the money is a gift and not a loan (a loan would affect your debt-to-income ratio). Some lenders also require the gifter to confirm they have no financial interest in the property. In the UK, Australia, and Canada, gifted deposits are widely accepted. In the US, FHA and conventional loan rules have specific gift fund documentation requirements.
Does the deposit affect my mortgage interest rate?
Yes, directly. Your loan-to-value ratio (LTV) is the size of your mortgage as a percentage of the property’s value. The lower your LTV (meaning the bigger your deposit), the less risk the lender is taking — and they reward that with better interest rates. Moving from a 5% to a 10% deposit, or from 10% to 20%, can lower your interest rate by 0.25% to 0.75%, depending on the lender and market conditions. Over a 25-year mortgage, that difference runs into thousands of dollars or pounds.
Conclusion
There’s no single right answer to how much deposit you need — but there is a right answer for your situation.
Start by understanding your borrowing capacity, researching the schemes available in your country, and building a savings target that includes all buying costs, not just the deposit itself. A 5% deposit can get you into the market today. A 20% deposit will save you money over the long term. Most buyers land somewhere in between — and that’s perfectly fine.
The most important step is calculating your real number and making a concrete plan to reach it. Once you know that number, the rest is execution.
