Why the bank of mum and dad is now moving in with the kids

Mum and dad are moving in with the kids as they look for ways to fund an otherwise unaffordable house purchase.

Real estate agents in South and West Auckland have told OneRoof that some of their buyers are extended families who have joined their incomes in order to secure a home loan in the face of rising interest rates, high house prices and tougher lending rules.

In many cases the parents are providing the equity, while their adult children have the incomes to service the loan.

Ray White Papakura agent Anthony Russell told OneRoof that he’s noticed phenomenon in communities where “they are really struggling and mum and dad have never actually owned a house”.

“There’s a fair bit of multi-generational buying because two incomes on their own isn’t enough for a mortgage so one or two of the kids are going in as well.”

This appeared to be especially prevalent among Island and Indian families, he said.

Ray White Manukau co-owner Tom Rawson said his office was currently working with an older couple and their adult children. The family members are selling their own homes so they can move into one large house.

“It’s quite common. It used to be the bank of mum and dad so mum and dad will secure the loans, but now we are seeing mum and dad are moving in with the kids,” Rawson said.

“The parents typically have got the equity and the kids have typically got the full-time jobs and kids of their own.”

Rawson said buyers in these situations typically look for larger four-to five-bedroom houses or houses that come with a smaller separate dwelling.

“The family will take the main house and the grandparents will take the smaller house,” he said, adding that these types of houses, known as home and income properties, were usually popular with investors.

Ray White Manukau co-owner Tom Rawson: “The parents typically have got the equity and the kids have typically got the full-time jobs.” Photo / Fiona Goodall

Rawson said that two-storey homes that had one or two ground-floor bedroom were also popular with multi-generational buyers.

“That’s actually a key feature of the house is that it’s got a ground floor bedroom. If it’s got a ground floor bedroom with ensuite, then that’s when you will drag out these [buyers].”

In Rotorua, homeowners have in the past few years been taking advantage of their larger sections and adding minor 70sqm homes on them for their extended family to live in. Professionals McDowell Real Estate principal Steve Lovegrove said that some families were living together to reduce their overall living costs.

Mortgage Managers mortgage adviser Stuart Wills has noticed an increase in mortgage applications from extended families. “I guess lots of people are looking at basically if I can’t buy normally, what are my options,” he said.

“Deposit is one of the key sort of things that holds a lot of people back from buying a house so even if they’ve only got $20,000 each, four times $20,000 is a lot better than two times $20,000.”

He is dealing with several applications at the moment where the adult children are looking at building a new house on the back of their parents’ section.

He said that parents often had good savings including KiwiSaver to use as the deposit, but were unable to pay it off the loan before they retired so their adult children’s incomes helped get their application over the line.

Harcourts Mt Roskill co-owner Nick Kochhar knows of several families where the mum and dad and their adult children are all earning so are looking to buy together in order to get lending.

Kochhar said the main reason families were doing it was because of how hard it is to get finance at the moment and the parents can help the children with the deposit by using the equity in their current house.

“They are getting hands on with their extended family by putting some deposit in because the existing mortgage they have they don’t much left on it.”

He is helping one family upgrade to a bigger house so all generations can live together, but said it is more common in his area to see the parents help their children buy the house without moving in.