That’s according to a report from mortgage lender Nationwide, which found that 66% of first-time buyers surveyed chose a cheaper home because it required DIY or renovations.
While many – three quarters – ended up undertaking much more work than they originally planned, and 18% undertook major structural works, this appears to be fast becoming a popular path for aspiring homeowners to take their first step on the property ladder.
Nationwide, which questioned 2,000 first-time buyers as part of its research, said the decision to choose a fixer upper was often a strategic decision rather than a compromise.
In fact, for 41% of those who chose a project, it enabled them to purchase in the exact location they wanted. In fact, this was the most common reason for purchasing a fixer upper.
But 30% said it meant they were designing their homes to their own tastes, while 23% wanted to increase the value of their property or prepare for future plans such as starting a family.
How much do first-time buyer renovations cost?
The cost of this extra work cost 60% of survey respondents £2,500, but almost a third spent more than £5,000 on painting, decorating, new flooring, general repairs and kitchen and bathroom improvements.
However, some projects can add more value, Nationwide says. A loft conversion or extension with a large double bedroom and bathroom can increase the value of a typical three-bedroom home by up to 24%.
How a mortgage can support renovation costs
Nationwide reported that many first-time buyers were planning for these additional costs. Nearly two-thirds (62%) have factored DIY or renovation expenses into their savings when building their deposit.
However, more than a fifth (21%) have borrowed more on their mortgage so they can keep their savings to fund improvements after moving in.
Nationwide said its Helping Hand mortgage boost supports eligible first-time buyers by allowing them to borrow up to six times income. For some, this could mean helping them secure a home while keeping funds for essential renovations, the lender said.
Lewis, 30, from Essex, who used Nationwide’s Helping Hand to buy his first home in Southend, has freed up savings that could have been used for a deposit to fund the property’s renovation costs.
“The property I wanted to buy needed some work on it, so when my broker, John Charcol, mentioned Nationwide help, this seemed like the perfect solution,” Lewis said.
“By being able to borrow more through my mortgage, I was able to put down a smaller deposit. This freed up money that I was able to put toward home renovations. I already bank with Nationwide, so it’s great to be able to get my mortgage with them as well in a process that was smooth and quick.”
Fixer-upper financing: Advice from a mortgage broker
Going forward can be a great way for first-time buyers to get onto the property ladder, but Nicholas Mendes, technical director of mortgages at mortgage broker John Charcol, advised those considering this route to plan carefully.
“There’s a big difference between painting the walls, changing the flooring, slowly improving the kitchen, and buying a property that needs structural work, rewiring, a new roof or major damp treatment,” he said.
“These costs can move very quickly, and first-time buyers are often the least able to absorb them because much of their savings have already gone to deposits, legal fees and conveyancing costs.”
He explained that there are mortgage products, such as Helping Hand from Nationwide, which allow for higher borrowing and can help some buyers, but he said they need to be carefully addressed.
“Borrowing simply for real estate expansion only works if monthly payments remain comfortable and there is still an adequate reserve for emergencies,” he explained.
He suggested that buyers get a proper survey and realistic quotes before finalizing. It’s also a good idea to make a clear distinction between essential work and work that can wait, he explained.
“For first-time buyers, the goal should not be to create a dream home straight away. Rather, it should be to buy something affordable, safe and mortgageable, and then improve it in stages without putting themselves under unnecessary financial pressure,” he concluded.
