With increasing house prices and first time buyers unable to secure mortgages, many adults are forced to live with their parents. According to the Office for National Statistics, 3.3 million 20 to 34 year olds lived with their parents and 286,000 households contained more than one family in 2013.
Multi-generational living is becoming increasing popular and has benefits for all of the generations involved.
The younger generations can save money and get help with childcare and the older generations can also benefit from sharing costs and household tasks.
However, multi-generational living can be very complex and there are a lot of factors you need to consider before deciding to share your home with your parents and/or children.
Who will own the property?
If one generation already owns the property, there is a risk that the other generations will feel (and be treated) like guests. You will also need to consider what will happen if the owners want to sell the property or if they die and other family members inherit a share of the house.
If you need to buy a property, how much is each family willing (and able) to contribute? If you invest different amounts into the home, will your share of the ownership reflect this?
Take advice before signing property over to children.
Sharing ownership
There are two types of legally binding agreements when sharing ownership of a property. If you get a ‘joint tenancy’ the property is owned in equal shares and if one ‘tenant’ dies, their share is automatically divided equally between the other owners.
If you own the property as ‘tenants in common’, each party has a fixed share of the property, which may or may not be equal. If one of the owners dies, their share is inherited according to their will.
While it makes more sense to buy the house as ‘tenants in common’, especially if you are investing unequal amounts into the property, all parties need to think about who will inherit their share and how this could impact on the other owners.
What if someone needs a mortgage to afford their share?
It gets even more complicated if you need a mortgage to help buy the house. Mortgage lenders are unwilling to lend money for a shared property, because it is difficult for the company to recoup their money if you default on your payments - they cannot repossess and sell a home if someone else owns part of it.
While putting all owners on the mortgage is a way round this, many lenders are reluctant to give mortgages to people past retirement age. If you are able to get a joint mortgage, be aware that you are all legally responsible for paying it off and if one party defaults, the other borrowers will still be liable for the outstanding amount.
Other practical considerations
If you have to sell your existing homes in order to buy a larger house together, it is unlikely that both sales will complete at the same time, so what will you do if it takes longer for one house to sell?
When choosing a property, it is really important to consider the practicalities of everyday living. How will you share the living space? Will you all share one big house or would it be better to find a property with an annex? How many bathrooms will you need? Will you be able to share a kitchen or will you need to add additional cooking facilities?
Meeting different and changing needs
You also need to think carefully about how everyone’s needs will change. Will the property still be practical if the older generation becomes unable to manage stairs? Is the location suitable for someone that is no longer able to drive?
Living with other people often involves compromise and it’s a good idea to set ground rules around having visitors, smoking, paying bills, bed times and any other aspect of living where there could be conflict or confusion.
There are many issues that need to be addressed before several generations of one family commit to living together. Unhelpfully, there are no simple answers as to how you manage your living arrangements, because every family has different circumstances and personalities.
For more information and free advice visit the Elderly Accommodation Counsel
