Repayments on a £20,000 Mortgage

Find out what the monthly repayments could be on a £20,000 mortgage and what factors can influence this amount.

Home Mortgage Repayments Repayments On A £20,000 Mortgage
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: June 3, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

June 3, 2024

Repayments on a £20,000 mortgage will vary depending on your mortgage type. Your mortgage repayments will be determined by the length of your term, interest rate, and the type of mortgage you get.

A longer term will mean smaller monthly repayments but will result in you paying more in the long term. The higher the interest rate, the more you’ll pay and if you get an interest-only mortgage, for example, you’ll only cover the interest charges, not the principal amount borrowed.

In this article, we’ll look at the monthly repayments you can expect for a £20,000 mortgage, the annual income, and the deposit amount you’ll need to apply for this mortgage. As well as how using a mortgage broker can help you obtain the lending you need at the most competitive interest rates.

How much does a £20,000 mortgage cost per month?

At the time of writing (June 2024) the average monthly repayments on a £20,000 mortgage are £117. This is based on current interest rates being around 5%, a typical mortgage term of 25 years, and opting for a capital repayment mortgage. Based on this, you would repay £35,075 by the end of your mortgage term.

Bear in mind, if you secure a mortgage with a longer term, 30 years for example, the total amount you pay back will be higher but your monthly repayments will be smaller.

Speak to one of the advisors we work with for a representative idea of what you might repay. They can help you secure favourable terms and lower repayments than you might get if you try to secure a mortgage by yourself.

Mortgage Repayment Calculator

This calculator can tell you the monthly and overall cost of your mortgage, based on the loan amount, interest rate, and term length.

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Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms
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Your Results:

The monthly repayments on a mortgage would be

The total amount paid at the end of your mortgage term would be

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How much do you need to earn to get a £20,000 mortgage?

As £20,000 is a small sum for a mortgage, you’ll likely need a large deposit to be approved or have specific circumstances. These include being a retiree looking to downsize to a smaller property or £20,000 being the outstanding figure ahead of a remortgage. In general, the amount you can borrow is based on your salary.

Almost all lenders will loan around 4 or 4.5 times your annual income, while some lenders may also be willing to offer 5 times or possibly even 6 times your annual salary.

Using these figures, you’d need an annual income of around £5,000 to be approved for a £20,000 mortgage. However, the circumstances in which this would be likely are if you already have a large deposit and/or the house you’re looking to purchase is valued at £100,000 or less.

With the average UK annual salary currently at £34,900 (June 2024), you might want to consider getting a joint mortgage with a partner, for example, if you’re unsure whether you’ll meet lender’s eligibility criteria. You can use your combined earnings for this calculation and increase your chances of approval if you’re both low-income earners.

In these circumstances, it’s best to consult with a broker who can indicate which lenders can offer this and whether you’d meet the lender’s affordability criteria.

How much deposit do you need for a £20,000 mortgage?

As a £20,000 mortgage is a small sum, the deposit requirements will vary from person to person. You might have a large deposit and are looking for a smaller mortgage for lower monthly repayments.

Or, you could be looking to purchase a house valued at £100,000 or less and only require a small mortgage. Generally, residential mortgage lenders require a minimum deposit of 5% to 10%. This percentage is based on the property value, not the mortgage amount.

However, as it’s rare for a house to be valued at under £50,000 in the UK, it’s unlikely you’ll be able to secure a mortgage with a deposit in this range. You’ll need a large deposit to get approved for a £20,000 mortgage to show lenders you’ll have no issues repaying the loan.

For example, if you were purchasing a property valued at £70,000 (rather than borrowing this amount), a minimum deposit of 5% to 10% would fall within the range of £3,500 to £7,000. Consequently, your mortgage amount would be between £66,500 and £63,000.

In this scenario, the lower deposit would result in higher monthly repayments. But with a larger deposit, you’d have lower monthly repayments and a lower loan-to-value ratio, which makes you more likely to qualify for competitive interest rates.

If you encounter bad credit issues or are interested in a mortgage for a non-standard construction property, you’re also likely to need a higher deposit of around 25%. Bear in mind, that these factors will limit your choice of lenders.

For buy-to-let mortgages, most lenders typically require a minimum deposit of 20%. However, an experienced mortgage broker in this field may be able to identify lenders who ask for less.

You can use our loan-to-value calculator below to see how the above scenarios play out

LTV Calculator

This calculator will tell you what your loan-to-value (LTV) ratio is, based on the property's value, your deposit/equity and the amount you're borrowing.

Enter an amount in pound sterling
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Property value minus your deposit/equity
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Loan amount must be less than property value

Your Results:

Your LTV is

This means that most mortgage providers will consider your deposit amount to be more than satisfactory, but speaking to a broker is still recommended to ensure you get the best deal.

This means you’re likely to meet the deposit requirements at most lenders, but since many reserve their best rates for those with higher deposits, speaking to a broker is recommended.

Many mainstream mortgage providers would consider this high and be reluctant to lend. Applying through a mortgage broker may be necessary to find a specialist low deposit mortgage lender.

LTVs have a direct impact on the rates available to you - speak to a mortgage broker and find out how to get the best deal based on your ratio.

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How to get a £20,000 mortgage

Once you’ve found a property and made some calculations, the next step in your mortgage application should be to find an experienced mortgage broker as this will boost your chances of getting approved at the best terms available.

Using our free broker-matching service you can speak to the right broker straightaway by simply enquiring online.

They’ll be able to help with:

  • Deposit requirements: The circumstances in which you’ll be approved for a £20,000 mortgage, will likely involve you having a large deposit and £20k being a top-up on top of this. If you’re a high-net-worth individual, for example, saving won’t be an issue. But putting aside 10% to 20% of your monthly income will help you build the large deposit you’ll need to get approval for a £20,000 mortgage.
  • Downloading and optimising your credit reports: It’s important to review your credit history before you apply for a mortgage, checking for any inaccuracies or outdated information that can be removed beforehand.
  • Gathering all the necessary paperwork required for your application: Your broker will be able to guide you through the application process and all the typical documents required – proof of income, at least three months of bank statements, personal ID, proof of address, evidence of deposit, latest P60 form etc.
  • Working out how much you can borrow:  Based on typical lender salary multiplier calculations, you may think £20,000 is the maximum you can borrow for a mortgage but that might not be the case. A mortgage broker can determine whether you can borrow more at better interest rates by considering your circumstances and whether you’re eligible for a better deal from lenders.
  • Finding the right lender and securing the best deal for you: Your mortgage broker will be able to identify those lenders offering the best interest rate terms available across the whole market. This will save you time and, potentially, some money too.
  • Guiding you through the process: Getting a mortgage can be difficult, especially if this is your first application. The right mortgage broker can help you with any issues you may face along the way, look after your interests and be a lifeline in case anything goes wrong.

Example monthly repayments for a £20,000 mortgage

Take a look at our repayment table below to see at a glance how the cost of a £20,000 mortgage can vary based on different rates and term lengths.

Interest rate 3% 4% 5% 6%
5 years £359 £368 £377 £387
10 years £193 £202 £212 £222
15 years £138 £148 £158 £169
20 years £111 £121 £132 £143
25 years £95 £106 £117 £129
30 years £84 £95 £107 £120
35 years £77 £89 £101 £114

If you decide to go down the interest-only route, these are some repayment amounts you could expect to pay until the end of the term. Repayments will be substantially lower and remain the same regardless of the term length, as the capital amount borrowed must be repaid in full, using a separate repayment vehicle, at the end of the term.

Interest-only 3% 4% 5% 6%
£50 £67 £83 £100

*For the purpose of these tables we assume the interest rate stays the same for the full length of the mortgage. Interest rates can change if you decide to remortgage on to a different rate or move from a fixed or discounted deal on to the lender’s standard variable rate (SVR).

With the Bank of England base rate currently at 5.25% (June 2024) and the average mortgage rates between 5%-6% the repayment figures under these columns in the table above would be the most realistic. However, as the base rate falls in the future, mortgage lenders should follow suit and reduce their rates too.

Remember, longer terms while maintaining the same interest rate, will result in a higher total amount being repaid.

Factors that affect monthly repayments

Here are some of the key criteria that could have an impact – both directly and indirectly – on your mortgage repayments:

Interest rates

The rate you secure will influence the monthly cost. Everything else being the same, a higher interest rate will mean you pay more for a £20k mortgage monthly. The rates available on the market can vary. So, it’s important to deal with a lender who’ll offer the most competitive rate for your circumstances.

Fixed or Tracker

You’ll also have the option to choose between a fixed rate vs a tracker mortgage. Usually, a fixed rate will be higher, increasing your monthly repayment. But, locking in a rate can allow you to better plan your finances.

Term Length

How long you take out a mortgage for can affect your rates and directly impact your monthly cost for a £20k loan. A longer term will likely reduce your monthly repayments, but it usually means paying more over the life of the mortgage.

Your age

Although you can get a mortgage at almost any age, time on your side can lead to better deals from lenders. This could mean lower rates and monthly repayments for your £20,000 mortgage.

The role your credit score plays

It’s worth downloading all your credit reports before applying for a mortgage because these scores can make a difference to the number of lenders willing to consider your application and, indirectly affect the rates you’ll be offered. Your broker can help with any mistakes and show you areas to improve. If you do have bad credit, specialist lenders are available.

If you’re unsure what your credit score is or want to check before you go any further, use the free tool below:

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Other mortgage costs to consider

There are a few other additional charges to think about that may impact the monthly costs when setting up a mortgage worth £20,000. Speaking to a mortgage broker about the costs listed below will give you more information about what they entail and ensure there are no unpleasant surprises.

Product fees

Some mortgages come with fees to set them up. These fees include a booking fee, an arrangement fee (between £0 and £2,000), and a valuation fee (around £300). If you choose to include these mortgage fees in your total loan, you won’t have to pay anything upfront. However, including them will increase the amount you pay each month.

Insurance

When considering a mortgage, you’ll likely need to account for additional insurance costs. These may include:

  • Home insurance: Covers your property against damage or loss.
  • Life insurance: Provides coverage for the mortgage in case of your death.
  • Income protection: Helps if you’re unable to work due to illness or injury.
  • Critical illness cover: Assists if you’re diagnosed with a serious medical condition

Stamp duty

Depending on the home’s value and whether it’s your main residence, you might be required to pay stamp duty. First-time buyers or those purchasing residential properties under £250,000 are exempt from this tax.

These costs typically arise during the purchase process. While they don’t directly impact monthly payments, they are an additional expense to consider in your calculations.

Why use Online Mortgage Advisor?

If you’re asking yourself how much a £20,000 mortgage will cost, there’s no point working with a high net worth broker, or even one who manages mortgages around £100,000. You need expert guidance specifically on smaller mortgages which means connecting with one of the many experts in our database.

They’ll be able to take stock of your finances, advise where to apply for the cheapest loan, and capitalise on existing relationships with high street and exclusive lenders to get you a home loan that suits your budget.

Reach out today via our online form or by calling 0808 189 2301 to be matched to the right mortgage broker for your needs.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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