From 24/7 Wall St. · Chris Lange · · 1m 10s
Dave Ramsey Warns Co-Buying Houses With Friends Risks Legal Traps
Co-buying homes with friends often leads to legal chaos if one stops paying, warns Dave Ramsey.
In brief
Co-buying homes with friends often leads to legal chaos if one stops paying, warns Dave Ramsey. Co-buying a house with a friend risks legal problems if one person defaults, as lenders treat it as joint debt. Originally reported by 24/7 Wall St..
Dave Ramsey's Warning
Dave Ramsey says co-buying a house with a friend rarely works out legally.
“I haven’t run into a situation where it works out well. Legally, you’re forming a general partnership. If the other person walks away, you’re stuck with the whole mortgage, and you can’t sell the house without their permission because they own it too.”
Mortgage Risk Explained
Co-borrowers face joint liability where lenders can collect full payments from either person.
Example Mortgage Math
A $320,000 loan at 6.5% over 30 years costs $2,023 monthly, with each person responsible for $1,011.
Sale Problems
Co-owners need both signatures to sell, leading to partition actions if one refuses.
Death Scenarios
Joint tenancy with survivorship gives the surviving owner full ownership, while tenancy in common passes shares through estates.
Survivorship Risks
Survivorship overrides wills, potentially leaving your share to a friend instead of your children.
Solo Payment Test
Check if you can afford the full mortgage payment alone before co-buying.
Prevention Steps
Sign written agreements, use tenancy in common for unequal shares, and get term life insurance.
The bottom line
Co-buying a house with a friend risks legal problems if one person defaults, as lenders treat it as joint debt.
