Kids returning to the nest could save thousands
The Office of National Statistics recently reported that there has been a 20% increase in 20-34 year olds living with parents since 1997.
That's an increase of almost half a million, despite the number of 20-34 year olds in the population remaining largely the same. But, instead of lamenting lost freedom, first direct believes that both parents and their 'Boomerang' children should see the situation as a financial opportunity.
The average UK rental price for a one bedroom property increased to just over £1,050 per month in July 2012. If rents continue to climb at the same rate seen over the last year (3.69%), they could spiral to nearly £1,260 by 2017. This, coupled with the rising cost of living, is encouraging more and more kids to return to the nest. However, there are benefits for both parents and their children to live together for longer.
What's in it for the parents?
A first direct Offset Mortgage gives parents the ability to use rent from their children to make unlimited overpayments, reducing the term and total cost of their mortgage
Their home can be occupied more often, improving security
Satisfaction in the knowledge that their children are saving for their future
Someone to look after pets and water plants when on holiday
If parents were to charge their child just £500 per month to live with them instead of renting their own place, their offspring would be free to make significant monthly savings, whilst the parents could use the money to make overpayments on their mortgage. Aside from getting £6,000 in rent each year, by making these overpayments on their Offset for just three years they would reduce the term of their mortgage by 4 months and save £1,151 on interest too. If they extended this to five years, their total interest saving would increase to £3,068 and a further 6 months would be cut from the term of their mortgage.
What's in it for the kids?
Not paying as much rent as for a private letting
Not paying utilities, insurance, tax etc - on average £3,817 per year
Knowledge that their landlord is trustworthy (hopefully!)
Any extra money can be saved as a deposit for their first home
Security and better quality of life
For those children that decide to return home, in five years they could save nearly £40,400 on rent alone. Add to this the money saved on bills, tax and insurance and their potential savings pot could reach nearly £59,500, a more than healthy deposit for a home on the first rung of the ladder and enough to cover legal expenses, fees and furnishing costs too.
However, a return home after independence is likely to cause friction, so first direct has pulled together a list of 5 tips to avoid family feuds
1. Parents - your child has been away and experienced autonomy, so be aware you're no longer 100% in control of their life
2. Kids - even though you feel like an adult, your parents probably still see you as the moody teenager you were when you left. Try not to prove them right - resolve any disagreement with adult conversation.
3. Kids - yes you've kept your own hours for years, but now you're back under their roof your parents are responsible for your safety again - call them and let them know if you're going to be late!
4. Parents - you should expect your progeny to keep the communal parts of the house to the level of cleanliness you've always expected, however now they're paying, their room is off limits. If they want to cultivate penicillin under their bed it's their choice, disgusting, but their choice!
5. Both - set regular meetings to assess where you're at and if the situation is still working for everyone. This will stop arguments boiling under the surface until they explode when the pressure gets too much
Ian Bartholomew, Senior Mortgage Product Manager at first direct commented: "If both parties can manage to get along, older children returning to the family home can be a great idea. It can help children save for a deposit to buy their first home more easily and parents can save money and reduce the amount owed on their mortgage."