Updated: May 17, 2022

£20,000 Mortgages

If you’re looking for a relatively low mortgage of £20,000, here we tell you who might lend to you, how much you might pay and what factors to consider.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: May 17, 2022

If you think you’re well within the borrowing eligibility for a £20,000 mortgage, there will still be a number of factors to consider before you can establish exactly what your monthly payments will be.

There are also minimum loan limits set by some lenders to contend with, making some low payment products harder to come by. Here we will talk you through exactly what to expect when looking for a £20k mortgage and how it will affect your pocket.

Can you get a mortgage for £20,000?

Yes, but this is considered a very small mortgage amount and some lenders have minimum loan caps which prevent them from offering mortgages of this size. There are mortgage providers who won’t go below £30,000, but the good news is that others draw the line at £20,000.

With the average house price in the UK now exceeding £350,000, it’s unlikely you will be wanting to borrow £20k as a substantial percentage of your property. Perhaps you have a large cash sum put down on a home but need to borrow the extra shortfall, maybe you’re looking to do some home improvements, or you could be hoping to buy a home as part of a government scheme which allows you to get on the property ladder with a relatively small mortgage.

Whatever your circumstances, speaking to a broker is recommended if you’re applying for a loan this small as their guidance can help you avoid falling afoul of lenders’ minimum loan caps.

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What income you will need

The lowest income multiple for lenders will be between 4 times and 4.5 times your income, so providing your salary is at least £5,000, your application should be strong. Some lenders do consider 5 times or 6 times multiples too. Other income streams, such as pensions, rental payments, commission or benefits could satisfy lenders.

These days there are plenty of lenders who approach mortgage approvals in a more holistic way, rather than strict rules around income. Instead, they will look at your financial situation and eligibility as a whole.

Calculating your affordability

Try our mortgage affordability calculator below to work out the exact amount you could borrow based on the standard income multiples that mortgage lenders use.

calculator icon

Mortgage Affordability Calculator

Our affordability calculator can tell you how much you can potentially borrow from a mortgage lender. Simply enter your total household income below and our calculator will do the rest.

Input full salaries for all applicants
£

You could borrow up to 

Most lenders would consider letting you borrow

This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.

Some lenders would consider letting you borrow

This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.

A minority of lenders would consider letting you borrow

This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.

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Monthly repayment calculations

The length of your mortgage term will make a big difference in how much you pay each month. There are a number of other factors that will affect this calculation too, such as rates and type of mortgage, which are covered in more detail elsewhere in this article.

Try our mortgage repayments calculator below to work out what your mortgage repayments could look like.

calculator icon

Mortgage Repayment Calculator

Our mortgage repayment calculator can tell you how much your mortgage will cost you each month and overall. Enter the amount you’re borrowing, the term length and interest rate, and our calculator will do the rest.


Enter the amount you're borrowing
£
2.5% is an average figure but the rate you get may vary
%
25 years is average, but most lenders offer longer and shorter terms
years

Monthly Repayments:

Interest Only:

Total amount paid at end of term:

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Example calculations

The length of your mortgage term will make a big difference in how much you pay each month. There are a number of other factors that will affect this calculation too, such as rates and type of mortgage, which are covered in more detail elsewhere in this article.

Here is an estimate based on a repayment mortgage with a 3.5% interest rate and without taking fees into consideration.

Mortgage 5 year term 10 year term 15 year term
£18,000 £327 £178 £129
£20,000 £364 £198 £143
£24,000 £437 £237 £172
£30,000 £546 £297 £215

Factors that could affect your monthly payments

There’s no one-size-fits all when it comes to mortgages, particularly for low amounts such as £20,000, so bear in mind the following components:

Your credit history

Your report will always be looked at by lenders and decisions can be made one way or another depending on how you have previously managed your finances. That’s not to say blips in your credit file mean instant rejection, but it does mean you should be ready to deal with the hurdles that could be presented during your application.

Term of loan

As the table above suggests, the length of your mortgage term has a substantial impact on your monthly payments. For example, paying a £20,000 mortgage over 10 years will work out very differently than over five. Paying off your mortgage as soon as possible means less interest to pay in total over the term and freeing yourself up from the loan quicker, however longer terms can work well if your income is low.

Interest rates

These are set within each product and by every lender on an individual basis. The lower the interest rate, the lower the cost of your mortgage, which is why getting your application in good shape could unlock better deals.

Types of mortgage

Even on small product loans, monthly payments are greatly affected by the type of mortgage you take on. Get good advice and educate yourself on which would be best for you. Repayment or interest only; fixed rate or tracker. Every factor should be considered.

How a broker can help you get the best deal

Professional brokers are not only for those who want specialist, complex and high-stakes mortgages. In fact, their role is to find the very best deal out there for your individual circumstances, no matter how much you are looking to borrow.

There are brokers who specialise in securing small mortgage loans for borrowers, such as £20,000. They have deep working relationships with lenders who have no minimum mortgage amounts, which means your chances of finding the right mortgage provider, first time, will increase.

Honest and reliable brokers, like the ones in our network, are often the best money spent when going through the mortgage process, because ultimately they help you save in the long term by securing the best mortgage for you. Make sure you find one who is willing to do their research, take time understanding your circumstances, have contacts and experience, and have access to the entire marketplace. They should also be happy to help you with your paperwork.

How much deposit you will need

You will need to have the remaining balance as the deposit if you are applying for a straightforward mortgage. Most lenders will expect you to put down at least 10% of the property value as a deposit, although some will be happy with 5%.

For example, if you want to buy a home for £150,000, your cash sum deposit will be £130,000, and your £20k mortgage will make up the rest of the purchase.

This calculation will be different if you’re looking to buy a home via a government scheme. For example, a Help to Buy scheme involves putting down a 5% deposit while the government lends you 20%, and you’ll require a mortgage on the rest.

Lenders who offer small mortgage loans

There are a number of lenders out there who have no lower limits or whose limits are below that of £20k. There are some who are happy to lend small amounts, providing the purchase price is above a certain amount. For example, Skipton Building Society has no minimum loan amount, but stipulates that the property value should be no lower than £50,000.

The opportunities for small sum borrowing vary greatly though, with Norton Home Loans offering loans as low as £3,000 on a second-charge basis and others, such as Metro Bank, going no lower than £50,000. Market Harborough Building Society has a whopping £200,000 minimum cap. It’s difficult to know where to turn first, so it’s advisable to go to a broker as they understand the market and how each lender operates in this way.

Alternatives for low mortgage borrowing

If you think getting a mortgage on a relatively low amount is unnecessary or you’d rather consider other financial products first, there are a number of options, such as…

  • Borrowing from a family member
  • Getting an unregulated loan
  • Paying via credit card
  • Releasing equity from another property you own

Some of these financing alternatives come with varying degrees of risk, so getting professional support is crucial in these circumstances.

Get matched with the right broker for a £20,000 mortgage today

If you’re wondering whether a £20,000 mortgage is right for you or you’re looking for help with your options, getting the right broker on your side is key. The advisors we work with have access to the whole marketplace and have a deep understanding of lenders with no strict limits on the minimum amount they’d let you borrow.

We only work with highly skilled and reliable brokers within our network, who are fully vetted, guarantee a five-star service and are handpicked by us to match your exact needs. To find out whether they can help you, call us on 0808 189 0463 or make an enquiry online for a free, no-obligation initial consultation with a broker who specialises in small mortgages today.

FAQs

Are borrowing limits the same for remortgaging?

Not always. There is usually more flexibility around remortgaging, so more lenders might be willing to ignore their set lower limits and approve small loans more easily.

Ask A Quick Question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

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 OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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