Buying a House With a Friend: The Math and the Mess

Rent is brutal, house prices are worse, and you and your best friend just had the same idea at the same time: what if we buy a house together? Split the down payment, split the mortgage, split the bills, and both of you stop throwing money at rent. It sounds smart, and the math can actually work. But buying a house with a friend is also a business partnership with someone you chose because you like them, not because you vetted their finances — and that combination ruins friendships if you skip the hard parts.

Start with the math, because that is the part that sells the idea. Say you find a house for $250,000. With a 3 percent down payment, which is the minimum for a conventional loan for first-time buyers, the down payment is $7,500 — or $3,750 each. Closing costs run another 2 to 5 percent of the price, so $5,000 to $12,500, split two ways. Add moving costs and a few basics for the house, and each of you is in for roughly $7,000 to $10,000 upfront. The mortgage on the remaining $242,500 at around 6.5 percent interest is about $1,533 a month before taxes and insurance. Add property tax, homeowner's insurance, and private mortgage insurance — which you pay when your down payment is under 20 percent — and you are looking at roughly $2,000 to $2,200 a month total, or $1,000 to $1,100 each. If you are each paying $800 to $1,000 in rent right now, that is not a huge jump, and the difference is that part of your payment is building equity instead of disappearing.

That is the good version. Here is what the good version leaves out. First, the mortgage is joint. Both names are on the loan, and both of you are fully responsible for the entire payment, not just your half. If your friend loses their job and stops paying, the bank does not care about your arrangement — you owe the full amount, and if it does not get paid, both of your credit scores take the hit. Your credit is now tied to someone else's financial life for the next 30 years, or at least until you sell or refinance.

Second, one person's credit sets the rate. When two people apply for a mortgage together, the lender looks at both credit scores, and the rate is based on the lower one. If you have a 740 and your friend has a 640, you are both getting the rate that a 640 earns, which can mean paying tens of thousands more in interest over the life of the loan. Check both credit scores before you start house hunting. If one of you has a much weaker profile, it might be better for the stronger person to buy alone and rent a room to the other one, even if that feels less fair.

Third, the costs do not stop at the mortgage. Homeowners spend about 1 percent of the home's value per year on maintenance, on average — that is $2,500 a year on a $250,000 house, or about $200 a month, and it is lumpy. A new water heater is $1,500. A roof repair is $3,000. A broken AC in July is $5,000, and it cannot wait. There is no landlord to call. You need a shared emergency fund for the house, funded before you move in, with a rule for how it gets topped up. If you do not agree on this upfront, the first big repair becomes a fight about money, and fights about money between friends are how friendships end.

The exit plan is the part everyone skips because it feels awkward, and it is the most important part of the whole deal. What happens when one of you wants out? People move for jobs, get into relationships, go back to school, or just want their own space. You need a written agreement — a real one, ideally reviewed by a lawyer, which costs a few hundred dollars and is worth every penny — that answers these questions. If one person wants to sell and the other wants to stay, the one who stays buys the other one out, and how is the buyout price decided? What if neither of you can afford the buyout? How long does the other person have to come up with the money? What if one person stops paying their share — is there a deadline before the other person can force a sale? What if one of you gets married and wants their partner to move in? These are not hypotheticals. They are the most common reasons co-ownerships blow up.

A few practical rules make the whole thing much safer. Keep a joint account just for the house, funded equally, and pay every house bill from it so there is never an argument about who paid what. Put the ownership split in writing, even if it is 50-50 — especially if it is not, because if one of you put in more of the down payment, that needs to be recorded. Agree on a minimum stay, like three to five years, so nobody is surprised by an early exit.

Buying a house with a friend can be one of the smartest financial moves you make in your twenties. It turns rent into equity, splits costs that are impossible alone, and gets you into a home years earlier than you could on your own. But it only works if you treat it like what it is: a business deal with someone you care about. Do the math together, check both credit scores, fund a repair account, and write down the exit plan before you fall in love with a house. The friendship survives when the rules are clear. It is the unspoken assumptions that kill it.

Disclosure: This article was drafted with AI assistance and reviewed by the author.