It’s an increasingly familiar scenario: grown-up children moving out of rented accommodation and back into the family home as they save for their first property.
For some, the idea of coming together under one roof again conjures the return of family movie nights and getting to know your loved ones afresh. For others, it will be a case of making the best of living in a familial and financial pressure cooker.
So, what are the ground rules for parents and grown-up children thrown together again, and what are the best ways parents can accelerate the moving out date?
To live harmoniously, charity Family Lives suggests agreeing upfront that the ‘child’ pays house-keeping or rent. It also advises regular communication, even if just by text, to avoid misunderstandings between parents and children unused to accounting for where they are.
More generally, both sides should agree behavioural and money boundaries: should they stay over somewhere else if it gets past a certain hour? Should they contribute to food bills, or just maintain their own cupboard/shelf in the fridge?
Parents are, of course, now helping their children to get on the property ladder (perhaps if for no other reason than to reclaim their own homes). Legal & General says that parents were involved in around a quarter of all mortgage transactions last year, and estimates that the Bank of Mum and Dad helped more than 300,000 people buy a home in 2016, giving an average of £17,500.
There are two main ways of (gently) pushing children out of the door: giving them money towards their first home, or being involved in their mortgage.
When it comes to giving them funds, David Hollingworth of mortgage broker London & Country advises families to be clear on the basis they’re providing money for a deposit: ‘If you’re planning to give your children money to help them out, from the lender’s point of view this needs to be a gift and not a loan where you hope to be paid back at some point. Even if a lender will accept a loan is the source of the deposit, it would factor any cost into its affordability calculation which would reduce the amount that could be borrowed.’
Meanwhile, Gavin Scott, managing partner at the London office of Stowe Family Law, cautions: ‘Whether you are gifting money to children or loaning it, taking legal advice at an early stage can help to avoid financial difficulties for them at a later date, particularly if they end up cohabiting with someone who wants to contribute financially to the property, which could potentially give them an entitlement to it.’
In terms of going in on a mortgage with offspring, there are several arrangements that allow families to help first-time buyers in different ways. Hollingworth explains: ‘There are a few lenders like Virgin Money that allow parents to act as guarantors to help borrowers access higher amounts, as well as products like Barclays Springboard which achieves higher loan to valuations at cheaper rates without parents having to give cash away or act as guarantor. Smaller building societies also have some interesting deals.’
Barclays Family Springboard involves the ‘family helper’ opening a Helpful Start Account with 10 per cent of the property purchase price at the same time the borrower applies for a mortgage. The helper gets their savings back after three years with interest as long as the borrower keeps up their repayments. The borrower pays a fixed rate for three years and, importantly, they only need a low – 5 per cent – or no deposit, and also retain full rights over the property.
The Family Mortgage from The Family Building Society brings various parental assets into the mortgage calculation, helping to reduce the cost for the buyer but without asking parents to gift money. This is achieved through different means including a savings account attached to the mortgage application that provides security for the buyer’s mortgage and reduces the monthly payments for the borrower while the savers continue to earn interest. There are also options for securing the borrower’s mortgage through the family home, as well as family offset where parental savings can be offset against the child’s mortgage to reduce the amount of money which incurs interest.
Helen Monks Takhar is a freelance journalist and writer