A multigenerational household is a home where more than two adult generations live together. Multigenerational homes have been steadily rising in the United States, with more than 1 in 4 Americans currently living in a household with three or more generations.
A recent Generations United's study also found that 57% of Americans living in a multigenerational household started or continued to live in their households because of the pandemic. Financial planning can help families set boundaries, reduce emotional strain and live together successfully.
Choosing to Live In a Multigenerational Home
Multigenerational family living has grown across all U.S. racial groups, most age groups and men and women. During the Great Recession in 2008, family members chose to live together to cut costs. But the trend has not reversed. In recent years, many Americans have continued to prefer to live in multigenerational homes for a variety of reasons.
Common Reasons for Living with Family Members
Some middle-class Americans have found it difficult to manage without the collective efforts of family members. Wage stagnation and increased life expectancy have played a role, as has growing racial and ethnic diversity in the U.S. population. In addition to other factors, the cost of healthcare, elderly care, childcare and other issues helps explain the rise in multigenerational living.
- Need for elderly care: Having your parents live with you can significantly reduce costs of expensive nursing homes or other assisted living facilities. The monthly median cost of a private room in a nursing home is $8,821, while the monthly median cost of assisted care living is $4,300, according to a Genworth’s Cost of Care Survey. By opting for multigenerational homes, families also spend more time together and have the opportunity to offer more loving home health care.
- Assistance with childcare: According to Urbansitter, families spend an average of $16.75 per hour to pay for a babysitter for a single child. The cost rises to $19.26 per hour for two children. A multigenerational home helps families reduce babysitting or childcare costs, not least because older grandparents sometimes offer care free of charge.
- Unemployment among younger generations: Generation Zers and Millennials were greatly affected by unemployment or lost income due to the COVID-19 pandemic. The U.S. Bureau of Labor Statistics reported that youth between 16 and 24 faced unemployment rates of 18.5 percent in July 2020, an increase of 9.4 percentage points from the same month a year prior. Periods of financial crisis tend to push younger adults home.
- Cultural and familial ties: According to a recent study by the Pew Research Center, Asian and Hispanic populations are growing more rapidly than the white population. Minority populations are more likely than whites to live in multigenerational family households due to strong cultural and familial ties.
Finding the Right Multigenerational Property
When bringing multiple generations together, you should choose a home with the capacity to handle a broad range of lifestyle demands. Multigenerational homes may need to include separate entrances and multiple bedrooms to meet the diversified needs of family members. Common space, fully furnished basement suites and a bigger-sized kitchen are also common characteristics of a multigenerational home.
Planning for Your Family’s Needs
There are various lifestyle basics to consider before finding a multigenerational home. Having a realistic discussion can help your family set boundaries and expectations at the outset. If you’ve addressed key topics in a frank and thoughtful conversation, you’ll also know what to look for when it comes to house hunting.
What to Look For
Determine who will be living in the home
How many people will be living in the home? Will someone’s significant other be staying with you? Will your loved one be staying with you permanently or temporarily? Without having a solid grasp of these details, you may end up choosing a home that either makes your family members feel uncomfortable or increases the cost of living.
Ask each family member about their priorities
Personal needs can vary from one generation to another. For example, a newly married couple may want to have a separate entrance. Gen Zers might appreciate a bedroom on an upper floor to have more privacy. An older member of the family may want a room near the kitchen. Ask each member of the household what their personal priorities are.
Understand physical needs
Elders may need big and spacious bathrooms with grab-bars and walk-in showers that make bathing easier. Baby boomers might favor having their bedroom on the ground floor if they cannot take the stairs. Before buying or renovating a home, determine what physical needs must be addressed.
Deciding on a Property
Having a good multigenerational property can improve the prospects of success when living with loved ones. A multigenerational home should fit the specific needs of most family members regardless of age or health. Speaking to a real-estate agent can help you gain clarity and locate a fit. The following factors should serve as a baseline.
Ideally, you should look for a home location where all generations feel comfortable. Check a property’s accessibility to workplaces, schools, hospitals, shopping malls and parks before deciding on a spot. Elderly grandparents who are unable to drive far distances may favor being close to a lake or park where they can easily go for a walk. A younger adult without transportation may benefit from being close to a bus stop or city center. Aim for balance.
A multigenerational home should give space and privacy to everybody to engage and interact. Common spaces, including a connected kitchen, dining and living room, would bring everyone together while eating and engaging one another. Private bedrooms can give family members time to be alone. Remember to think about a space as a whole and see whether some areas can serve various purposes.
Specialists in the field of multigenerational homes can help you understand whether your current property can be outfitted to work for everyone in your family. When determining whether to buy or remodel, consider factors such as renovation costs and the structural stability of an old home. Check all options for purchasing a new home before making a decision.
How to Finance a Home with a Mortgage
Figuring out how to pay for a multigenerational home is a key step toward making a long term and sustainable financial plan. One of the best ways to secure funding is to finance a home with a mortgage, which is a loan taken to purchase a property or real estate asset. A mortgage allows a lender to take a property back in the case of default, and it can provide buyers with greater flexibility.
4 Basics for Securing a Mortgage
Upon finding a suitable multigenerational home, you may need to evaluate available financing options. Even if your family has sufficient money to purchase a house, looking at the option of financing a home with a mortgage can prove beneficial depending on mortgage rates. If you plan to purchase a multigenerational home, consider taking the following steps:
Make a down payment
When it comes to securing a mortgage, lenders will ask you to pay a certain percent of a purchasing price as a down payment. For example, if the purchase price of a multigenerational home is $200,000, the lender might ask for a down payment of 20%, or $40,000. Most U.S. states, including New York, Texas and California offer a down payment assistance program to qualified homebuyers.
Review your credit history
Credit scores play a crucial role in getting a loan approved. Assess your credit history before applying for a loan so you know what to expect. If you have a co-applicant, you may need to review their credit score as well. A better credit history lowers your home loan interest rate and makes it more likely that you’ll be extended a higher credit line.
Evaluate your options
Several banks, housing companies and non-banking institutions offer financial assistance. You should evaluate various types of mortgages before choosing a suitable option. Ask mortgage lenders about interest rates, loan processing times and mortgage insurance.
Get financial documents in order
To be approved for a mortgage, you may need to submit a formal loan application, along with documents including tax returns, W-2s, bank account statements, employer names, payslips and property information. Approval can often depend on how quickly you submit such paperwork.
Planning Your Finances for Your Multigenerational Family
Financial planning can help a multigenerational home be successful. At its core, strong planning revolves around having each household member contribute to either generating income or minimizing expenses. Maintaining open communication and making your expectations clear at the outset can also help you avoid misunderstandings later on.
Set clear expectations
Determine the costs of your downpayment, monthly installments and home insurance, in addition to recurring costs such as food, groceries and utilities. Then consider each family member’s earnings before assigning responsibilities and clarifying positions.
Once you consider who the contributing members of your family are, determine who will pay for what. Grandparents may be inclined to take care of a down payment if they have money saved up. Working professionals may be able to take care of home insurance.
Not everyone has to contribute financially. Since elderly family members may not contribute monetarily, they may assume responsibilities such as picking children from school or caring for them during holidays. A non-working member of the family may also volunteer to cook, clean, take care of lawn care or do home repairs.
Learning How to Live Together
Families who live in multigenerational homes tend to have strong emotional bonds. To sustain a positive living environment, aim to strike a balance between spending quality time with a loved one and respecting someone’s privacy. Being able to cooperate is one of the most important factors in helping a family live in harmony. The following practices can help multigenerational households:
Foster open and honest communication
Communication is essential for co-living. Engage all members of the family in the decision-making process, and keep conversations age-appropriate. If some members are not present, avoid talking about them or presuming what they would prefer. Spend time discussing matters such as caregiving, childcare, meals, finances and social events.
Have realistic expectations
When living with others, aim to keep expectations of perfection at bay. For example, the expectation that all family members will have dinner together every night might be unrealistic in a multigenerational household. Instead, take a look at when schedules might coincide and plan accordingly.
Accept family members unconditionally
Make an effort to accept everyone for who they are. For example, some family members might be introverts who don’t engage as much in group interactions. Show love towards all regardless of habits and personalities.
Respect is the backbone of forming healthy relationships in a multigenerational home. Avoid dictating terms to family members. Instead, consider various points of view as valid, even if you disagree with certain viewpoints.
Whether it's finances or anything else, strive to keep a good attitude. Share your happiness with others and seek their advice on important financial and non-financial matters. Your attitude can influence a family environment.
Expert Insight on Managing a Multigenerational Home
MoneyGeek with industry leaders and financial experts to provide insight into the best practices that multigenerational households can follow.
- What are the advantages and challenges of living in multigenerational homes?
- How important is financial planning for a multigenerational home?
CEO and Founder of Sure Dividend
CEO of Cream City Home Buyers
Owner of Simple Homebuyers
Resources for Managing a Multigenerational Home
When more than one generation lives in the same house, the financial demands of each group must be considered. Various resources and groups provide useful information which can help.
- National Association of Realtors: The association produces a trends report which provides useful information on the characteristics of home buyers, steps involved in the home buying process and financing a home purchase.
- Genworth: Genworth can help you and your family calculate the cost of care across all cities in the United States. You can also compare the cost of care between two geographical locations, which can help when you plan to buy a home or rent a flat.
- USA.gov: This website can give you invaluable information on buying a home and include details on the government programs that can help you pay for a purchase. Their guide covers FHA home loans for first-time homebuyers, homeownership vouchers, programs by state governments and programs for rural residents.
- FRED Economic Data: FRED gives the historical 30-year fixed-rate mortgage average in the United States, which is important to monitor when contemplating a home purchase. Data is updated weekly ending Thursday.
About Naveen Kumar Reddy
- PWC. "Emerging Trends in Real Estate 2021." Accessed September 7, 2021.
- UrbanSitter. "2019 Babysitting Rates & Childcare Costs Study." Accessed August 30, 2021.
- U.S. Bureau of Labor Statistics. "Employment and Unemployment Among Youth Summary." Accessed August 30, 2021.