"How much deposit do I need?" is the first question almost every buyer asks, and the honest answer — "it depends" — is useless unless you can show them what it depends on. The deposit is not one number. It is the outcome of three separate constraints stacked on top of each other: what the lender will advance against the property, what the purchase costs demand in cash, and what the valuation actually comes in at. For a mortgage advisor or buyers' agent, sizing all three correctly before an offer goes in is what separates a completed sale from a deal that collapses two weeks before closing. This guide breaks down each constraint, shows how the deposit tiers change the cost of the loan, and works through a full example you can adapt for a client.
The deposit — called a down payment in North America — is the share of the purchase price the buyer funds from their own resources rather than borrowing. It is paid at completion, it permanently reduces the loan, and it becomes equity in the home from day one. It is not a fee, and it is not lost. What it buys, beyond the property itself, is a lower loan-to-value ratio: the proportion of the property's value that the mortgage represents. Deposit and LTV are two views of the same fact. A 10% deposit is a 90% LTV. A 25% deposit is a 75% LTV. Every pricing decision the lender makes flows from that ratio, which is why the deposit conversation is really a rate conversation in disguise.
The deposit tiers, and why the bands matter
Lenders do not price risk on a smooth curve. They price it in bands, and the boundaries are usually at 95%, 90%, 85%, 80% and 75% LTV. That has a practical consequence advisors should hammer home: a client scraping together another €4,000 to cross from 89.5% to 90% LTV may save nothing at all, while another €4,000 that takes them from 80.4% to 79.9% can move them into a materially cheaper tier for the life of the fix. Below roughly 80% LTV, most markets also drop the requirement for mortgage insurance — the premium that protects the lender, not the borrower, and which the borrower pays for. The 20% deposit is famous not because it is a rule, but because it is where those two effects land at once.
The 5–10% floor
In most markets a 5% deposit is the practical minimum for a standard residential mortgage, and 10% is where the product range widens meaningfully. High-LTV lending is available, but it is priced for the risk, and a buyer at 95% has almost no cushion: a modest fall in prices puts them into negative equity, where the loan exceeds the value of the home. Some jurisdictions differ sharply — the Netherlands permits borrowing up to 100% of the property's value, which does not mean a buyer needs no cash, only that the cash goes to costs rather than equity.
Above 20%
Past 20%, the returns diminish. Going from 80% to 75% LTV typically buys a smaller rate improvement than the step before it, and beyond 60% most lenders stop discounting altogether. Money the client puts in above that point is earning them the mortgage rate risk-free — worth doing if they have no better use for it, but rarely worth delaying a purchase for.
The costs nobody budgets for
The deposit is not the only cash a buyer needs at completion. Transfer tax or stamp duty, notary or conveyancing fees, mortgage arrangement fees, the valuation fee, a survey, and often a buyers' agent's commission all land in the same week — and, crucially, none of them can be borrowed against the property in most markets. Depending on jurisdiction these run somewhere between 2% and 10% of the price. An advisor who quotes a deposit without quoting purchase costs alongside it has given the client a number that is wrong by tens of thousands. Present the two as a single "cash to close" figure from the first meeting.
The valuation gap: where deposits really fail
Here is the trap. A lender does not lend against the price a buyer agreed to pay. It lends against the valuation. When the valuation matches the price, the deposit works exactly as planned. When it comes in short, the shortfall lands entirely on the buyer, in cash, on top of the deposit they had already saved — and it lands late, after the offer is accepted and the survey is paid for. A buyer stretched to 90% LTV has no room to absorb it. This is why serious advisors and buyers' agents form an independent view of value before the offer is made rather than waiting for the lender's surveyor to tell them.
This is the gap Biedradar is built for: enter an address and it returns comparable sales, a valuation range and market signals, then produces a branded property analysis report in minutes. An advisor can see whether the asking price is supported by the comps before a client commits their savings to it, and a buyers' agent can put a defensible number in front of a client rather than an opinion. If a home looks likely to value short, you have two options a week early instead of one option too late — and if it does happen, our guide on how to handle a low appraisal covers the routes back.
A worked example
A buyer has €70,000 saved and is looking at a home listed at €400,000. Purchase costs in their market run to roughly 4% of the price — €16,000 — leaving €54,000 available as deposit. That is 13.5% down, a 86.5% LTV, which rounds into the 90% pricing band: not terrible, but above the 85% tier and well above 80%. At a 90%-band rate of, say, 4.6% over 30 years, the €346,000 loan costs about €1,773 a month.
Now the valuation comes in at €385,000. The lender will advance against €385,000, not €400,000. To buy at the agreed price the buyer must find the €15,000 gap from the same €54,000, dropping their true deposit to €39,000 against a €361,000 loan — a 93.8% LTV on the valued figure, likely a different product and a higher rate, and possibly outside the lender's appetite entirely. Had the same buyer negotiated to €385,000 up front, they would have held €54,000 against a €331,000 loan: an 86% LTV, the original pricing, and €15,000 less debt. (Figures are illustrative, to show the mechanics; rates, costs and lender bands vary by market.) The lesson is not that the buyer needed a bigger deposit. It is that they needed a better view of value before they made the offer.
How to advise on the deposit
Work backwards, not forwards. Start from the property the client actually wants, establish a defensible valuation range for it, add the purchase costs, and only then ask what deposit the savings support and which LTV band that lands in. Check the answer against the affordability assessment — a bigger deposit does not raise the borrowing ceiling, though the cheaper rate it unlocks can nudge it. And leave a cushion. A client who commits every last euro to hit an LTV band arrives at completion with no reserve for a valuation gap, a failed boiler, or the moving costs, and that fragility is a worse outcome than a marginally higher rate. The best deposit is not the biggest one the client can technically produce; it is the one that clears a pricing band, covers the costs, survives a soft valuation, and still leaves them solvent on the day they get the keys.
Frequently asked questions
How much deposit do you need to buy a house?
There is no single figure. Most lenders will advance up to 90–95% of the property's value, so a deposit of 5–10% is the practical floor in many markets, while 20% is the level at which rates improve sharply and mortgage insurance usually falls away. Some markets — the Netherlands being the notable exception — allow 100% financing of the value, but the buyer still needs cash for purchase costs.
Is a deposit the same as an earnest money deposit?
No. The deposit (or down payment) is the buyer's own equity contribution to the purchase price, paid at completion and permanently reducing the loan. An earnest money deposit is a good-faith sum paid shortly after the offer is accepted, held in escrow, and credited against the purchase at closing — it is part of the same money, but the two serve different purposes at different moments.
Why does a 20% deposit matter so much?
At 20% down, the loan-to-value ratio falls to 80%. That is the threshold at which most lenders stop requiring mortgage insurance, offer their better rate tiers, and treat the file as low risk. The jump in cost between an 85% and a 90% LTV is often larger than the jump between 75% and 80%, because pricing moves in bands rather than smoothly.
What happens if the valuation comes in below the agreed price?
The lender lends against the valuation, not the price. If a home is agreed at €400,000 but values at €380,000, the mortgage is calculated on €380,000 — and the buyer must cover the €20,000 gap in cash on top of their planned deposit. This is the single most common reason a deposit that looked sufficient turns out not to be.
Does a bigger deposit increase how much you can borrow?
Not directly. Borrowing capacity is set by affordability — income, commitments and the stress test. A larger deposit does not raise that ceiling, but it lowers the LTV, which can unlock a cheaper rate, and a cheaper rate reduces the monthly payment, which can modestly increase what the affordability model will support.
