Should you let your adult kids live at home?

One of the main blockers preventing more young people buying their first home is the ability to save a large enough house deposit. On average, it takes 8 years to save up for a home, and the average deposit size in the UK now stands at £34,500 for a £240,000 home. However in some areas of the country homes cost more than this, requiring larger deposits - in the South East, the average deposit is £72,000!

One of the easiest ways you can help your children buy their first home is to allow them to live at home for a while, either for free or on subsidised rent. But some may feel resistant to allowing their adult children to move back into their childhood bedroom. In this article, we’ll explore the pros and cons of letting your children to live at home, and alternative ways you could help them buy sooner. 

Pros

• Help your children save up sooner. With rents rising by over 10% annually, living at home can be an easy way to provide your adult children with financial relief from cycles of high rent. Charging them enough money to cover their share of the bills and a small amount of rent will normally still be less expensive for them than private renting, which now accounts for over 28% of renters’ take-home earnings. With more disposable money, they can save up for milestones like buying their first home sooner.
• Save your children from poor quality housing. There are plenty of renting horror stories, and the data backs up these tales. In the UK, 64% of private rentals do not have an EPC rating of C or above, meaning they are energy inefficient, mainly due to lack of insulation or even double glazing. Shockingly, 30% of renters say they can’t heat their home to a comfortable temperature. Research from Citizens Advice shows that 2.7 million renting households struggle with damp, mould or excessive cold, resulting in the average tenant paying £350 more a year on heating because of poorly insulated and damp homes. Allowing your children to “rent” at home prevents them from renting sub-standard properties which will not only be less comfortable to live in, but more costly too.
• Provide a support system. During challenging times, such as break ups, job changes or when money is stretched, living at home can provide a much-needed safety net for young adults. 
• Quality time. Most of us spend less time with our children as they get older, as they might move away and spend more time with friends, partners and their own children. Allowing your adult children to live at home provides a unique opportunity for you to enjoy quality time with them in the short-term.

Cons

• Loss of independence. When children move away from home and form their own lives independently, moving back home, even for short periods, can feel restrictive and constraining. Living at home for a couple of months or more may result in tension between you and your children if they feel that their independence has been curtailed. On the flip side, you may feel frustration if you feel your children are becoming over-reliant on you or reverting back to childhood behaviours.
• Financial strain. If you are planning on supporting your adult children financially, this can place a strain on your own finances and retirement plans.

How much rent to charge your children living at home

Determining how much rent to charge your adult child for living at home is a decision that involves financial, emotional, and practical considerations. There's no one-size-fits-all answer, as it depends on your family's unique circumstances, financial goals, and your child's financial situation.

Some might not want to charge anything, but here are some factors to consider when making this decision:

1. Your child's financial situation

The biggest factor to consider when determining how much rent to charge your child is what their take home pay is. Consider not only your child’s total earnings, but how much they have at the end of the day after tax, pension contributions, student loan payments, as well as their employment status.

If they have a stable job with a reasonable income, they may be in a better position to contribute more towards household expenses. If they are working to pay off loans or credit card debt, they might need to pay a smaller amount of rent to accommodate these costs.

2. Household expenses

It’s safe to assume that your household expenses will increase with an extra person in the home. Everything from your weekly shop to your utility bills will be affected, and it’s fair for you to expect some support from your child. 

Work out the total monthly cost and decide the portion you want your child to pay. If there are four people living in the house, you might decide you want them to pay 25% of everything, or less if you want to charge them a subsidised cost. Some costs, such as groceries, they might want to keep separate if they prefer to buy their own food.

If you still have a mortgage, and you’d like them to contribute toward that, too, then add that into your calculations. 

3. Rental rates in the area

If you do want to charge, it’s a good idea to research rental rates in your area. This will help you determine what's a fair amount to charge. This can help avoid potential conflicts. Plus, if you’d like to offer them a discount on what they might pay nearby, this will act as your benchmark.

4. Your financial goals

Consider your own financial goals, particularly if you're saving for retirement. Charging rent can help you maintain your financial stability and work towards your retirement goals. If you're planning to invest in home improvements or repairs, the rent you charge can help cover these expenses, too.

5. Fairness and open communication

Have an open and honest conversation with your child about your expectations regarding rent and household contributions. This will ensure they understand the reasons behind your decision.

If your goal is to provide support while encouraging your child's independence, then you might charge a reduced rent to maximise their ability to save up money or pursue other financial goals. Be open to adjusting the rent amount if your child's financial situation changes. Life circumstances can change rapidly, and flexibility can help maintain a positive family dynamic.

In summary, the amount you should charge your adult child in rent for living at home depends on various factors, including your child's financial situation, your household expenses, your financial goals, and your family's communication and understanding. It's essential to strike a balance between providing support and encouraging independence while maintaining open communication to ensure everyone is on the same page.

Alternative ways to support your child’s homeownership dream

Allowing your adult children to live at home isn’t the only way to help them get on the property ladder sooner. The Saga Mortgages platform, provided by Tembo, enables you to compare the various options available to you. Our smart technology will show you the ways you could support a mortgage, using your income, pension, savings or property. Some of these options include:

• Income Boost. Help your child get a home of their own, without handing over any of your savings. Become a Booster on their mortgage by adding some or all of your earnings to their household income, helping them to boost their maximum borrowing potential. Please note, as an Income Booster if your child doesn’t make their monthly payments you will be required to step in to financially cover them.
• Deposit Boost. Unlock money from your property with a Deposit Boost, then gift the proceeds to your child to add to their current deposit, or help them create a house fund from scratch. As a Deposit Boost is a small mortgage secured against your property, remember that if you miss the monthly payments on your mortgage there is a risk of repossession.
• Savings as Security. If you do have cash savings, you could help your child buy a home of their own sooner by using your savings in lieu of a house deposit. This can allow them to get a mortgage even with no money put aside themselves. Keep in mind that because you are offering your savings as security for your child’s mortgage, if they do not keep up with their repayments you might not get all of your savings back. You also cannot access your savings for a set period of time, normally 5-years.
• Direct them to a mortgage expert. By working with an expert in affordability like Tembo, your child can discover ways they could increase their buying budget, with or without family support. 

Conclusion

Supporting your child's homeownership dream is a significant decision that requires careful consideration of both financial and emotional aspects. Remember, your home may be repossessed if you do not keep up payments on your mortgage.

The expert team of mortgage experts at Saga Mortgages understands the significance and complexity of family support in buying a home. Complete a mortgage recommendation in under 10-minutes, and Saga Mortgages will show you all the ways you could support your child’s home purchase, or how they could boost their borrowing potential by themselves - unique to you and your family. Get started today.