1. Leaving collateral on “someone else’s dirt”
Jeremy’s housing situation is precarious because he doesn’t have control over the land on which his home sits.
Millions of Americans live in manufactured homes across the country, according to the Pew Charitable Trust, and 35% of those who financed their purchase have a “home only loan.”
That means they owe money on something that almost always depreciates in value compared to a house. And on top of that, they lack control or ownership over the land, which is typically an appreciating asset.
“You do not have control of the situation,” Ramsey explained to Jeremy. He points out that if anything were to happen — like say the in-laws were to cause a car accident and face a lawsuit as a result — the dirt under their trailer could be taken from them.
“They have no control over that and you have no control over that. So you have set yourself up. And I've seen this a thousand times in 30 years of doing what I do — not owning the dirt under your trailer is a massive mistake.”
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Find the best rate for you2. Pitfalls of borrowing from friends and family
Jeremy’s situation is exacerbated by the fact that his loan was borrowed from his family.
Nearly 37% of recent homebuyers in the U.S. financed their purchase with some financial assistance from their parents or grandparents, whether that be co-buying, gifting them the deposit or allowing them to live rent free to save up for the purchase, according to Compare the Market.
However, a study published in the Journal of Consumer Psychology found that borrowing money from loved ones complicates the relationship and can lead to feelings of animosity.
Jeremy is certainly feeling the strain in his relationship with his in-laws, which is why Ramsey recommends getting out of the deal. He wants Jeremy and his wife to sell the manufactured home (even if they’re to take a loss on it), repay their debt and start over renting somewhere else.
“Borrowing 80,000 from your in-laws for anything for any reason is a massive mistake,” says the finance guru.
3. Setting clear boundaries in every deal
Unwinding Jeremy’s messy housing and financial situation could take some time. In the interim, Ramsey recommends having an open conversation with his in-laws to set clear expectations and boundaries.
“You just sit down and say, ‘I thought our deal was I pay you monthly payments and you're happy but now it's I pay you monthly payments and I have to check with you before I buy anything and that's not a deal I'm okay,” he recommended.
Getting on the same page should help stabilize the relationship. While Ramsey doesn’t agree the in-laws were right about their indignation that Jeremy chose to indulge in a $6,000 toy as long as Jeremy was upholding his end of the deal, he does point out he put himself in this precarious position.
Ramsey’s cohost Ken Coleman then piped up to offer Jeremy some “salve” after Ramsey’s scorching advice.
“Walk away from this to realize it could have got a lot worse, and this thing can get nastier if you don’t fix it now. And I could not say that enough. You can dig out of this but I would start digging quickly.”
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