Frayed Relationships, Damaged Credit, and Costly Additions — What a Multi-Generational Home Might Cost You

Are your adult children moving back into your home after struggling to find well-paying jobs after earning their college degrees? Or maybe you've moved your elderly parents back into your house to help care for them as they age?

If so, you're not alone. The Pew Research Center found that a record 57 million U.S. residents in 2012 lived in multi-generational households. That number — the most recent compiled by the research center — means that in 2012, 18.1% of the U.S. population lived in a home filled by residents of two or more generations.

Living with two or more generations under one roof can prove challenging. It might also become expensive, depending on what modifications have to be done to a home to make sure that everyone — no matter what generation — can live in peace. Here's what it might cost you.

Mortgage Matters

Chris Copley, regional sales manager for the Delaware Valley, Pennsylvania, and New Jersey in the Mount Laurel, New Jersey, office of TD Bank, says that he's worked with adult parents and their children who want to buy a multi-generational home together.

Such an arrangement can work. But Copley says that buyers need an exit strategy. What happens if after six years, the adult children whose names are on the mortgage note want to move on and buy their own homes?

"You need to have that conversation about what happens five to 10 years from now before you all agree to put your names on that mortgage loan," Copley says. "There has to be an exit strategy."

If there isn't? There could be hard feelings and damaged family relationships. That's because when people on the mortgage decide to leave the arrangement, there aren't many good options available. The owners could sell their home, splitting the mortgage. But that only works well if all parties are happy with selling.

The owners could refinance their mortgage loan so that it is only in the name of one of the homeowners. But that assumes that the new sole owners could afford the monthly mortgage payment on their salaries alone. This isn't always the case.

Copley's advice: Have a plan in place so that everyone knows what happens if one person wants to ditch the home.

Damaged Credit?

Some multi-generational households only list one generation's names on the mortgage loan. Parents who buy a home with their college-graduate children might only put their own names on the loan and then accept money each month from their children to help cover the costs of the monthly mortgage payment and other housing expenses.

Copley says that this arrangement can work if one generation's income is high enough for them to qualify for the mortgage loan on their own. But credit problems can result once one generation moves out of the home.

What if your name is on the mortgage and you're only able to make your payment each month because the members of the second generation in your home are covering half of your mortgage? What happens when the members of the generation move out and you can no longer afford the mortgage payment on your own?

Copley recommends that multi-generational households not overspend on a mortgage loan. It's best to make sure that the home you buy — and the mortgage payment that comes with it — is affordable enough so that the members of just one of the generations can make the payment each month if necessary.

It Might Not Be Cheap

You might decide it is time to move your elderly parents into your home to help care for them. This can be a way to strengthen the bond between you and your parents. But it can also be expensive. You might need to turn main-floor home offices into bedrooms, installing new walls and doorways as you do so.

You might also need to install grip-bars in bathrooms and widen hallways to make enough room for wheelchairs. To make sure that everyone is comfortable you might even need to build a new bathroom. You may be living with your elderly parents for 10 years, 20 years or more — you can't have your parents living like house guests arriving for a three-day stay.

Maybe you've decided to buy a new home to make room for yourself and your elderly parents or your adult children. This can prove costly, too. You'll need enough bedrooms to provide enough living space for everyone. And housing prices can jump substantially when you add a greater number of bedrooms to the mix. Zillow found that in 2015, the average price for a three-bedroom home in the United States stood at $173,300. That figure jumped to $291,300 for a four-bedroom home.

This doesn't mean that living in a multi-generational home can't work. It just means that families need to discuss financial matters honestly before making a move, and that they need to find a living space that provides enough room and privacy for all of the generations living under one roof.

How do you make your multi-generational home affordable?

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