How much deposit do you really need?

What a deposit actually does

Your deposit (called a down payment in the US and Canada, a deposit in the UK) is the slice of the price you pay upfront from your own money. The mortgage covers the rest. So if you buy a $400,000 home and put down $80,000, you borrow $320,000.

Every extra pound or dollar you put down is one you don't borrow — which means a smaller loan, a smaller monthly payment, and less interest paid over the life of the mortgage. You can see this instantly by changing the down payment on the mortgage calculator and watching the monthly figure move.

The 20% threshold: avoiding mortgage insurance

The famous “20% down” rule exists for a real reason. If you put down less than 20%, lenders usually require mortgage insurance — an extra cost that protects the lender (not you) and adds to your monthly bill:

• United States — under 20% down on a conventional loan means PMI (private mortgage insurance), which you can usually drop once you reach about 20% equity.
• Canada — under 20% down requires CMHC-style mortgage default insurance, a premium added to your loan that you can't cancel later.
• United Kingdom— there's no separate insurance you pay, but a deposit under ~20–25% pushes you into a higher loan-to-value band with a noticeably higher interest rate (next section).

Reaching 20% is the point where these extra costs typically disappear — which is why it's such a common savings target.

A bigger deposit usually means a better rate

Lenders price risk using loan-to-value (LTV)— the size of the loan as a percentage of the home's value. A bigger deposit means a lower LTV, which lenders see as safer, so they reward it with a lower interest rate. The jumps often happen at round numbers (for example 90%, 85%, 75% LTV), so even a slightly bigger deposit can tip you into a cheaper band.

The minimum you can put down

You usually don't need 20% to buy. Typical minimums:

• United States — many conventional loans allow as little as 3%; FHA loans around 3.5%; some VA and USDA loans 0% for those who qualify.
• Canada — 5% on the first $500,000 of price, then 10% on the portion above (with insurance required under 20%).
• United Kingdom — typically 5–10%, so 90–95% LTV mortgages, though rates are higher at that level.

These are minimums and rules change — check the current requirements for your country and loan type.

Bigger isn't always better: the tradeoff

It's tempting to put down as much as possible, but don't empty your savings to do it:

• Keep an emergency fund.A new home comes with surprises; being “house poor” with no cash cushion is risky.
• Budget for the extras. Closing costs, Stamp Duty (UK), legal fees, and moving costs all sit on top of the deposit.
• Consider the timing.Saving years for a bigger deposit while prices and rent rise isn't always a win — sometimes buying sooner with a smaller deposit is the better call.

The right deposit is the one that gets you a payment you're comfortable with while leaving you a safety net — not simply the biggest number you can scrape together.

See it for yourself

• Try different deposits on the mortgage calculator and watch the monthly payment and total interest change.
• Work out a price that fits your budget with the affordability calculator.