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Fixer-upper mortgages are in demand, according to research by Rightmove. The property firm’s study suggests that an increasing number of renters and homemovers are choosing houses that need renovating, but what is driving the demand for these properties, and what kind of mortgages are available to those who aren’t averse to a bit of DIY? Let’s find out…
What the figures tell us
Rightmove conducted a survey of 34,000 homebuyers who are purchasing fixer-upper properties and found that 69% of them were renters and 54% homeowners.
It is well documented that money can be saved if you have the skills and patience to renovate a property that needs a little work, rather than buy a pristine one. They can be more energy efficient too, as renovators can make eco improvements as part of the project.
But are these factors the only variables driving the surge in demand for fixer-upper homes?
Why fixer-upper properties are so in demand
As well as gathering data on the percentage of homebuyers opting for renovation projects, the property portal also quizzed participants on their motivation for choosing the DIY route.
A majority of 73% of the renters surveyed cited saving money as the reason they chose a fixer-upper, while 57% said they made the decision with energy efficiency in mind.
Of the renter sample, 47% were motivated by the opportunity to add value to their property, and 28% saw it as an opportunity to learn new skills.
Moving over to focus on the homeowners surveyed, 68% were motivated by the cheaper prices, 57% cited energy efficiency, 64% wanted to add value, and 73% saw their DIY project as the opportunity to create their “perfect home”.
Mortgage options for fixer-upper properties
There are a range of ‘renovation mortgages’ available for homemovers and first-time buyers. With this type of finance, a lender lets you borrow the funds to buy the property and some extra capital to carry out the renovation work, with the latter money released in stages.
Expect your lender to carry out site inspections to see how the renovation work is progressing, ensure there are no issues and monitor the increasing value of the property.
There are also alternative options to consider, including:
- Self-build mortgages: Potentially an option if you have property development/building experience and the property is derelict/uninhabitable and needs extensive work to make it meet the criteria for a standard mortgage.
- Bridging loans: A type of short-term finance you could turn to if you aren’t eligible for a mortgage in the here and now. These loans can provide funds for the development work, after which you can remortgage as your exit strategy.
- Day one remortgages: A minority of lenders will let you remortgage a property right after buying it, so you can release equity to fund the renovation.
Want to talk over your renovation plans with a mortgage expert - get in touch and one of our whole-of-market brokers will talk you through every possible option
