What is the average deposit for a first-time buyer?

Some higher percentage loans have re-emerged on the marketplace, with up to 90% loan theoretically possible. In other words, you would be required to put down £10,000 on a £100,000 purchase. As with all mortgages, your creditworthiness and income will also play a part.

Bigger percentages are available if you go for a 'shared ownership' property, where you buy a percentage of the property from a housing association, and rent the remainder - when you move on, you are entitled to your percentage of the sale price. And guarantor mortgages, where another person guarantees to pay the loan if you fail to do so, will also give a higher percentage.

However, it is in my view sensible to try for a larger deposit, because you will normally get a better deal (lower rates) if you can put down more - the greater the deposit, the greater is your choice of product costs and features (because there is more competition) and if you can I would try to save 15% or even 20% or more. Furthermore (an important point, this) the greater your deposit, the greater will be your security if house prices tumble, and of course the lower will be your monthly payments.

Other major costs you will have to meet include legal fees and disbursements (money paid by the lawyer to do various searches on your behalf), property valuation or survey (a survey or homebuyer's report costs more than the simple valuation, which is what the lender requires, but the fuller report will cost you more). Stamp Duty - a tax on property purchases - is zero for properties costing up to £250,000 for first-time buyers, with this special rate applying to first time buyers until March 2012. If your new purchase is more than this then Stamp Duty will be payable on the whole amount at 3% or above on the entire price. A house costing £250,000 would give rise to zero Stamp Duty, a house costing just £1 more would give rise to a £7,500 Stamp Duty!

So how much do you need, on top of the deposit? Probably not very much on a modest first-time purchase, especially if you carry out the removal yourself and if the lender allows certain of their fees to be added to the loan (which they often do allow, even if these fees take the loan above the percentage deposit figure). I would suggest £3000 to £5000, to allow for unexpected costs and perhaps a few sticks of furniture and some paint.

Indeed, there are some lenders that will offer 95% mortgages but only to strict first time buyers (never having owned property) but as to how you can police that.....?

as David mentions, all mortgage applicants will make tremendous savings by having a larger deposit. The main reason for this is that the lender has to keep a set reserve of cash with the Bank of England in relation to its residential mortgage assets and in general the amount they have to set aside for a 75% or more mortgage as opposed to below 75% can be up to 8x. so to use a crude example if lending £70000 on a £100000 property they might have to set aside £2000 but if it were £70000 on a £85000 property they would need to set aside £16000. This means the lender now has less money available generally and so they will use this reason to ramp up the cost of higher % mortgages.

you will often find differences of 1.5% (or more) on rates offered for a 95% compared to a 75% mortgage.

of course, after the purchase deposit you will still need a sum to cover solicitor costs and surveys (£1000 isnt unrealistic) and stamp duty depending on the purchase price.

not to mention its useful to still have a rainy day fund in the bank after you have moved in so that you have something set aside for emergencies