Morgan Stanley
  • Wealth Management
  • Nov 1, 2020

Everyone Under One Roof: Considering a Multigenerational Home

More families are considering a multigenerational home to accommodate aging parents or adult children.

In many families, parents consider changing houses once the children have grown, perhaps downsizing to a smaller home or moving to a new area to enjoy warmer weather or a lower cost of living. 

But what if instead of downsizing, you’re searching for a home that can support two or more generations?  Thanks to longer lifespans, you may have aging parents who may not be able to live independently, or adult children who are taking longer to form their own families and may be looking to save money on housing costs in the meantime.

More people are living in a home with multiple generations. Nearly 1-in-5 Americans lives in a multigenerational household, according to a Pew Research Center study in 2016.1 Pew defines multigenerational as a household that includes two or more adult generations, or one that includes grandparents and grandchildren. Indeed, the most common reason for purchasing a multigenerational home is to ease the caretaking of elderly parents, according to the National Association of Realtors.2

If you’re considering a multigenerational house, you may be wondering if you should buy new, or renovate your existing home. If you’re looking to buy, know that more homebuilders are designing homes to accommodate several generations, with specific features such as second kitchens and separate entrances.3 

Other broader considerations include what kind of living space you’ll need—for example, is there enough room for a live-in health aide, if needed—whether multigenerational living is a permanent arrangement or just temporary, and how expenses will be divided among family members.

If you decide to buy and it’s been many years since you’ve been in the home market, keep in mind a couple of factors before you hit the first open house.

  1. Decide how much you want to spend: Everyone should agree on what they can afford and who will be responsible for paying bills before making a purchase. Will any family members be contributing to monthly housing expenses? Keep in mind that how much you want to spend and how much you can actually afford may be two different numbers.

  2. Determine how long you may want to stay in the home: Many consumers are familiar with traditional 15-year and 30-year fixed-rate mortgages. However, if you plan on staying in your home for a shorter period, it may be worth exploring alternatives such as an adjustable rate mortgage (ARM). With an ARM, you pay a set interest rate for a predefined number of years, after which the interest rate is adjusted based on market conditions. 

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An ARM may be worth considering if you don’t plan to stay in the home a long time. An ARM may also help you save on interest costs over the time you’re in your property. Those savings could potentially free up money to make a home friendly to older family members, such as adding an entrance ramp or additional bathroom. Keep in mind that your monthly payments may rise or fall when the interest rate adjusts after the predefined period. 

By comparison, a fixed-rate 15- or 30-year mortgage offers predictable and stable monthly payments for the life of the loan. A fixed-rate mortgage may be a good option if you plan to stay in your home for a long time and/or are seeking stable payments.

Find a Mortgage Lender with Competitive Rates

Shopping for a mortgage lender can be one of the most important steps of the home-buying process. These days, many people searching for a home loan begin online for everything from rates and loan terms to potential lenders.

As you begin your search, you may opt to speak to your Financial Advisor to learn more about residential mortgage products offered by Morgan Stanley Private Bank, National Association. Your Financial Advisor can connect you with a team of mortgage specialists who can help identify which options may be available.  The team can help you from start to finish.

Your relationship with Morgan Stanley may also help you qualify for relationship-based pricing, which may provide discounted rates for you or your immediate family members.

Before you start shopping seriously, you may seek to obtain a conditional preapproval letter for a residential mortgage loan, which allows you to understand in advance what loan size you may qualify for.