Kids Returning to the Nest Could Save Thousands
How to make the 'Boomerang' phenomenon pay
(firmenpresse) - LEEDS, UNITED KINGDOM -- (Marketwire) -- 07/23/12 -- 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, 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 GBP 1,050(i) 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 GBP 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 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 GBP 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 GBP 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 GBP 1,151 on interest too(iv). If they extended this to five years, their total interest saving would increase to GBP 3,068 and a further 6 months would be cut from the term of their mortgage.
What's in it for the kids?
For those children that decide to return home, in five years they could save nearly GBP 40,400 on rent alone(iii). Add to this the money saved on bills, tax and insurance and their potential pot could reach nearly GBP 59,500(ii), 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...
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."
Notes to Editors
(iv) Example assumes a home worth GBP 250,000 with an outstanding mortgage balance of GBP 150,000 using first direct's fee free 65% LTV 3 year fixed rate offset mortgage, currently 4.59% over a term of 15 yrs.
Use first direct's to work out how you could save and reduce the term of your mortgage by making overpayments.
Parents should consider that they may need to pay tax on some of the GBP 6,000 rent and that their utility bills may increase.
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Datum: 23.07.2012 - 17:51 Uhr
Sprache: Deutsch
News-ID 167718
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LEEDS, UNITED KINGDOM
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Retail Banking
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"Kids Returning to the Nest Could Save Thousands"
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