New Build Deposits Explained: Reservation Fees, Exchange Deposits, and the 5% vs 10% vs 15% Decision

The Three Layers of New Build Deposits

Unlike a resale purchase where you negotiate a single deposit at exchange, buying a new build involves three distinct payments at different stages. Understanding when each is due — and what protections you have — prevents nasty surprises.

Layer 1: The Reservation Fee (Day 1)

When you choose a plot, the developer asks for a reservation fee to take it off the market. This is your first financial commitment.

Typical amount: £500 for properties under £300,000; £1,000 for properties over £300,000. Some premium developers charge up to £2,000
When it's paid: Immediately when you reserve — often the same day you visit the sales office
How it's paid: Debit card, credit card, or bank transfer. Some developers accept credit cards, which gives you Section 75 consumer protection
Is it deducted from the price? Almost always yes — the reservation fee is deducted from your purchase price at completion, so it's not an additional cost
Is it refundable? This is where it gets complicated. Most reservation agreements allow a cooling-off period (typically 7–14 days) during which you can cancel and get a full refund. After that, refundability varies by developer:
- Some developers refund the reservation fee if you pull out for a legitimate reason (mortgage declined, survey issues)
- Others make it non-refundable after the cooling-off period regardless of the reason
- A few make it partially refundable (e.g., £500 of a £1,000 fee)

Critical tip: Read the reservation agreement before you sign it. Have your solicitor review it if possible. Pay particular attention to the refund terms, the deadline for exchange of contracts, and any conditions that could forfeit your fee. The reservation agreement also locks in the purchase price and any agreed incentives — if these aren't documented here, they may not be honoured later.

Layer 2: The Exchange Deposit (4–8 Weeks After Reservation)

When you exchange contracts, you commit to buying the property. At this point, a deposit — usually 10% of the purchase price — is transferred to the developer's solicitor (or a stakeholder).

Standard amount: 10% of the purchase price. On a £300,000 property, that's £30,000
Negotiable? Sometimes. Some developers accept a 5% exchange deposit, especially for first-time buyers or when sales are slow. This must be agreed before exchange and confirmed in the contract
Where does it go? The deposit is usually held by the developer's solicitor as "stakeholder" — meaning they hold it in a client account and neither party can touch it until completion. Alternatively, it may be held as "agent for the seller," which means the developer can access it before completion. Your solicitor should insist on stakeholder terms where possible
What if you pull out after exchange? You lose the exchange deposit. The developer can also sue for any additional losses (the difference between your agreed price and what they eventually sell the property for). Pulling out after exchange is financially devastating — only do it with legal advice
NHBC deposit protection: If the developer goes into administration before completion, your exchange deposit is protected up to £100,000 under the NHBC Buildmark warranty (or equivalent). This protection only applies if the developer is registered with a warranty provider

Layer 3: The Mortgage Deposit (Completion Day)

Your mortgage deposit is the difference between the purchase price and the amount your mortgage lender will lend you. It's expressed as loan-to-value (LTV):

95% LTV mortgage: You need a 5% deposit — £15,000 on a £300,000 property
90% LTV mortgage: You need a 10% deposit — £30,000 on a £300,000 property
85% LTV mortgage: You need a 15% deposit — £45,000 on a £300,000 property

The exchange deposit and the mortgage deposit overlap — your 10% exchange deposit counts toward your mortgage deposit. So if you have a 10% mortgage deposit, you don't pay anything additional at completion (the mortgage covers the remaining 90%). If you have a 5% mortgage deposit, you'll need to arrange for your lender to cover the other 5% of the exchange deposit — your solicitor and broker handle this, but it must be set up before exchange.

How the Numbers Work: Deposit Timeline for a £300,000 New Build

Here's a practical example showing when each payment leaves your account:

Scenario A: 10% Deposit Buyer

Day 1 (Reservation): Pay £500 reservation fee by card
Week 4–8 (Exchange): Transfer £30,000 (10%) to stakeholder via your solicitor. The £500 reservation fee is noted as part of the purchase price — it'll be deducted at completion
Completion day: Your mortgage lender sends £270,000 (90%) to the developer's solicitor. The £30,000 already held from exchange is released. The £500 reservation fee is deducted from the purchase price. Total from your savings: £30,000 + £500 = £30,500 (the £500 effectively comes back to you as a price reduction)

Scenario B: 5% Deposit Buyer

Day 1 (Reservation): Pay £500 reservation fee
Week 4–8 (Exchange): The contract requires 10% (£30,000) at exchange, but you only have 5% (£15,000). Options:
- The developer agrees to a reduced 5% exchange deposit (£15,000) — increasingly common for FTBs
- Your mortgage lender provides a "5% deposit exchange guarantee" — they confirm they'll cover the other 5% at completion, allowing exchange to proceed with a £15,000 deposit
- You use a deposit bridging arrangement (rare, and usually expensive)
Completion day: Your mortgage lender sends £285,000 (95%). The exchange deposit is released. Total from your savings: £15,000 + £500 = £15,500

Scenario C: 15% Deposit Buyer

Day 1 (Reservation): Pay £1,000 reservation fee
Week 4–8 (Exchange): Transfer £30,000 (10%) — standard exchange deposit
Completion day: Your mortgage lender sends £255,000 (85%). You transfer the remaining £15,000 (the extra 5% beyond the exchange deposit) through your solicitor. Total from your savings: £45,000 + £1,000 = £46,000

The 5% vs 10% vs 15% Decision

Choosing your deposit level isn't just about what you can afford — it determines your mortgage rate, monthly payments, and financial resilience. Here's an honest comparison on a £300,000 new build:

5% Deposit (£15,000) — 95% LTV

Typical mortgage rate (2026): 5.0–5.5%
Monthly repayment (£285,000 over 30 years): approximately £1,530–£1,618
Total interest over 5-year fixed term: approximately £68,000–£75,000
Pros: Get on the property ladder sooner. Less time renting (and paying someone else's mortgage). Property price growth may outpace the extra interest cost
Cons: Higher interest rates. Risk of negative equity if prices dip (you only have 5% buffer). Fewer lender options — not all lenders offer 95% LTV on new builds because of the new build premium
New build specific risk: If your property down-values by more than 5% at the mortgage valuation stage, you'll need to find extra cash or renegotiate. Down-valuations are more common on new builds, particularly on early phases

10% Deposit (£30,000) — 90% LTV

Typical mortgage rate (2026): 4.3–4.8%
Monthly repayment (£270,000 over 30 years): approximately £1,337–£1,417
Total interest over 5-year fixed term: approximately £55,000–£62,000
Pros: Significantly better rates than 95% LTV. Most lenders are comfortable at 90% on new builds. Exchange deposit matches mortgage deposit — no complications. More buffer against negative equity
Cons: Takes longer to save. Still a premium over 85% LTV rates. If prices fall 10%, you're at break-even
This is the sweet spot for most new build buyers. The rate improvement from 95% to 90% LTV is the biggest single jump — typically 0.5–0.7% lower, which saves £1,500–£2,000 per year in interest

15% Deposit (£45,000) — 85% LTV

Typical mortgage rate (2026): 4.0–4.5%
Monthly repayment (£255,000 over 30 years): approximately £1,218–£1,292
Total interest over 5-year fixed term: approximately £48,000–£54,000
Pros: Access to the best mainstream rates. Strong buffer against price fluctuations. Lower monthly payments give more breathing room
Cons: Requires significantly more saving time. The rate improvement from 90% to 85% is smaller (typically 0.2–0.3%) than the jump from 95% to 90%
Best for: Buyers who can afford to wait, or who are stretching to buy a more expensive property where the lower rate makes a material difference to affordability

The Rate Jump That Matters Most

The biggest rate improvement is between 95% and 90% LTV. Going from 90% to 85% saves less. Going from 85% to 80% saves even less again. If you're deciding between stretching to 10% or settling for 5%, the extra saving effort is almost always worth it. If you're deciding between 10% and 15%, the benefit is smaller — you might be better off keeping the extra cash as an emergency fund rather than locking it into equity.

New Build Deposit Rules That Catch Buyers Out

The 10% Exchange Deposit on a 5% Mortgage

This is the most common confusion. Your mortgage is 95% LTV (5% deposit), but the developer wants 10% at exchange. You don't have 10%. What happens?

The solution depends on the developer and your lender:

Option 1: The developer accepts a reduced exchange deposit of 5%. This is increasingly common, especially with large national developers who work with FTBs regularly. It must be agreed before exchange and written into the contract
Option 2: Your solicitor negotiates a "qualified deposit" where only 5% is paid at exchange and the contract acknowledges the mortgage covers the rest
Option 3: You genuinely need to find the extra 5% temporarily — borrowing from family with a gifted deposit letter, for example — and it's returned to you at completion when the mortgage pays out 95%

Your mortgage broker should flag this early in the process. Don't assume the developer will automatically accept less than 10% — get it confirmed in writing before you reach exchange.

Deposit Source Requirements

Mortgage lenders need to know where your deposit comes from. Acceptable sources include:

Personal savings: Provide 3–6 months of bank statements showing the accumulation
Lifetime ISA: The government bonus counts as savings. Your LISA provider transfers funds directly to your solicitor
Gift from family: The gifter must provide a signed letter confirming it's a gift (not a loan), plus their own bank statements and ID. Most lenders only accept gifts from immediate family (parents, grandparents, siblings)
Sale of another property: Provide completion statements from the sale
Inheritance: Provide a grant of probate and solicitor's letter
Savings from overseas: More documentation required — proof of source, currency conversion records, and potentially enhanced due diligence

Lenders are legally required to verify deposit sources under anti-money laundering regulations. Unexplained lump sums, cash deposits, or funds from cryptocurrency sales may require additional documentation and can delay your application.

Developer Incentives and Deposit Implications

If the developer offers a "gifted deposit" or "deposit contribution," your mortgage lender needs to know. Most lenders cap the total incentive package at 5% of the property value (some allow up to 8% on properties over £500,000). A gifted deposit counts within this cap.

Example: On a £300,000 property with a 5% incentive cap (£15,000), if the developer gives you a £10,000 deposit contribution, you can only receive up to £5,000 in additional incentives (legal fees paid, free flooring, etc.) before hitting the lender's cap. Exceeding the cap can result in the lender reducing the property's valuation by the excess amount — which means you need a larger deposit from your own funds. Your broker should model this before you agree any incentive package. See our guide on negotiating developer incentives for the full picture.

What Happens to Your Deposit If Things Go Wrong?

You Pull Out Before Exchange

You lose the reservation fee (if the cooling-off period has passed). No other financial penalty — you haven't committed contractually. Your solicitor's fees for work done to date are still payable (typically £300–£800 for aborted conveyancing).

You Pull Out After Exchange

The developer keeps your 10% exchange deposit. They can also claim additional damages if they sell the property for less than your agreed price. This is a worst-case scenario — only proceed to exchange when you're certain about your mortgage, your finances, and the property.

The Developer Cancels or Goes Into Administration

If the developer fails to complete by the long-stop date (the contractual deadline), you can rescind the contract and recover your exchange deposit in full. If the developer becomes insolvent, your exchange deposit is protected up to £100,000 by the NHBC Buildmark warranty. Reservation fees may not be protected — another reason to pay by credit card where possible for Section 75 protection on amounts over £100.

The Property Down-Values

If the mortgage valuation comes in below the purchase price, your lender will only mortgage the lower figure. You need to cover the difference yourself. Example: you're buying at £300,000 with a 10% deposit (£30,000), but the valuation comes in at £285,000. The lender will lend 90% of £285,000 = £256,500. You now need £300,000 - £256,500 = £43,500 as your deposit — £13,500 more than planned.

Options when this happens:

Ask the developer to reduce the price to match the valuation (they often will, especially late in a phase)
Challenge the valuation — your broker can request a re-valuation or try a different lender whose valuer may assess it differently
Find the extra cash (family gift, additional savings)
Walk away before exchange (losing only the reservation fee and solicitor costs)

Saving for Your Deposit: The Key Numbers

How long does it take to save a deposit? Here's the maths for a £300,000 new build:

5% (£15,000) saving £500/month: 2.5 years (or 2 years with a LISA bonus of £1,000/year)
10% (£30,000) saving £500/month: 5 years (or 4 years with LISA)
10% (£30,000) saving £1,000/month: 2.5 years
15% (£45,000) saving £500/month: 7.5 years (or 6.5 years with LISA)
Couple saving £750/month combined with two LISAs: 10% deposit in approximately 2.5 years

For a detailed savings strategy including LISA maximisation, family gifting rules, and every other way to build your deposit faster, read our guide on how to save for a new build deposit.

Deposits for Different Buyer Types

First-Time Buyers

Most FTBs aim for 5–10%. The Lifetime ISA is the single most effective tool — a couple maximising two LISAs for 3 years adds £6,000 in free government bonuses. Some developers offer deposit contribution schemes specifically for FTBs, but check how these interact with your mortgage lender's incentive caps.

Shared Ownership Buyers

You only need a deposit on your share, not the full property value. Buying a 25% share of a £300,000 property means your purchase is £75,000 — a 5% deposit on that is just £3,750. However, you'll also pay rent on the remaining 75% share. Read our scheme comparison guide for the full breakdown.

Home Movers (Second-Time Buyers)

If you're selling an existing property, your equity becomes your deposit. The challenge with new builds is timing — you may need to sell your existing home before the new build completes, or bridge the gap. Some developers offer part-exchange schemes where they buy your existing property directly (typically at 90–95% of market value) to guarantee the chain. Check whether the convenience is worth the price discount.

Buy-to-Let Investors

BTL mortgages on new builds typically require a minimum 25% deposit. Lender options are more limited for new build BTL, and some lenders won't lend on new builds at all for investment purposes. A specialist broker is essential.

Deposit Checklist for New Build Buyers

☐ Confirm how much you need for exchange (10% or negotiated lower)
☐ Verify your mortgage LTV and the deposit amount required
☐ Understand the gap between exchange deposit and mortgage deposit (if any)
☐ Check reservation fee refund terms before signing
☐ Gather deposit source documentation (bank statements, LISA statements, gift letters)
☐ Ask your broker about lender incentive caps if accepting developer contributions
☐ Confirm NHBC deposit protection is in place
☐ Have a contingency plan for down-valuations
☐ Budget for fees on top of your deposit — they're typically £4,000–£5,000 extra