First-Time Buyer Mortgage 2026: What 5% vs 10% Deposit Really Costs

At 95% loan-to-value (LTV), a 5% deposit is £12,500 and the loan is £237,500. HSBC's 95% two-year Fee Saver shows 5.94% initial interest and a £0 booking fee. At 90% LTV, a 10% deposit is £25,000, the loan £225,000, and the same lender's 90% Fee Saver shows 5.54% and £0 booking fee. Both listings show £250 cashback; neither includes your solicitor, survey or insurance.

With monthly interest at the stated annual rate divided by 12, and 300 equal monthly repayments, the calculation gives £1,522/month at 5% versus £1,387/month at 10% (rounded). The difference is £134/month, but it does not all come from a better interest rate: the 10% buyer also borrows £12,500 less. Over the first 24 payments, interest is approximately £27,725 vs £24,471; the £3,254 difference is the financing cost avoided by bringing more cash, not a £3,254 profit on the deposit. The larger-deposit buyer keeps £12,500 less liquid cash on completion.

Try your own purchase price, term and rate in the mortgage repayment calculator. Its defaults may differ from these HSBC product assumptions; enter the rates manually. A mortgage agreement in principle is a useful next filter, but it is not a guaranteed final offer.

A fixed deal protects the payment during its initial period, not for the entire 25 years. If the first 24 payments follow the example above, the remaining balances would be about £228,708 at 95% LTV and £216,181 at 90% LTV. For a deliberately hypothetical 8% remortgage rate over the remaining 23 years, repayments would be roughly £1,815 and £1,715 a month respectively. 8% is a stress assumption, not a forecast or product quote. If your hypothetical all-in monthly housing budget is £1,800 before other housing costs, the £1,815 stress payment already breaks it, and the £1,715 case leaves just £85 for those costs. That is not enough for council tax, energy, maintenance and insurance. Change the budget to your own actual take-home pay and committed expenses; a lender's maximum borrowing figure is the wrong target.

The apparent £100 difference at reset is smaller than the original £134 because the stress test uses one common rate on the two outstanding balances, isolating the benefit of the smaller loan. Do not treat 24 months at a promotional rate as the whole cost: HSBC lists a follow-on variable rate of 6.24% on these products as viewed, which can change, and a future deal will depend on the then-current LTV, valuation, credit and income. Compare full illustrations, early repayment charges and all fees with an adviser rather than projecting the introductory rate to year 25.

Bank Rate was 3.75% on the Bank of England's published history when checked on 4 October 2026, but it is not the mortgage rate. Your lender's product rate and term determine your payments. For the trade-offs between rate types, read our fixed versus variable mortgage guide.

At £250,000 and assuming an eligible first-time buyer purchasing their only home, England and Northern Ireland's SDLT first-time buyer relief means £0 tax (nil rate up to £300,000). Do not apply this result to every UK purchase. In Wales, main-residential LTT is £1,500 (6% of the £25,000 above £225,000); there is no separate first-time buyer rate in that table. In Scotland, LBTT first-time buyer relief increases the nil band to £175,000; at £250,000, £1,500 is payable (2% of £75,000), assuming relief applies. Without relief Scotland's bill would be £2,100.

That makes the deposit-plus-tax subtotal £12,500 / £25,000 for the two England/NI cases, or £14,000 / £26,500 for Wales or an eligible Scottish first-time buyer. These totals exclude all other purchase costs. Ask conveyancers for written quotes including searches and disbursements, obtain a property survey quote, and set aside removal costs and a repair reserve before deciding that the bigger deposit is affordable. If it uses the last of your cash, the smaller deposit with a sustainable payment can be safer than a paper saving on interest. Check relief and surcharges for your exact transaction with your solicitor; see our worked stamp duty guide for purchases at other prices.

For an eligible saver, the Lifetime ISA rules allow up to £4,000 a year in contributions with a 25% government bonus, up to £1,000 annually. That can build a deposit, but a bonus is not income to cover monthly repayments. Check the purchase and account-opening conditions, withdrawal charge and property limit in the LISA guide before earmarking the money.

Next, obtain a decision in principle, disclose debts and regular spending honestly, and compare personalised illustrations on equal terms: identical home, loan term, initial deal period, booking fee, cashback and what happens at expiry. The 95% and 90% examples deliberately use two fee-free products from one lender so fee differences do not masquerade as an LTV advantage. A £999-fee rate could change the ranking over two years; pay attention to total cash paid and the balance remaining, not just the lowest advertised rate. Follow our first-home buying checklist for the documents and transaction steps.

This article is for informational purposes only and does not constitute financial advice. You should seek independent financial advice before making any investment decisions. Your home may be repossessed if you do not keep up repayments on your mortgage.