Breaking A Lease To Buy A House: Can (And Should) You Do It?
Sidney Richardson7-minute read
August 10, 2021
Buying a house is one of the biggest and most exciting commitments you can make – so if you’ve sealed the deal on a new home, congratulations! But what happens when you’ve secured a new home while still in the middle of a lease term? Whether or not you can (or should) break a lease to move into a new home can be a confusing gray area.
If you’re stuck in this predicament, read on for our guide to your options when breaking a lease to buy a house.
Can You Break A Lease If You Buy A House?
Without a landlord’s permission, there aren’t actually many ways you can legally break a lease agreement early. It’s generally legally justifiable to break a lease in extreme circumstances – such as your apartment becoming uninhabitable, you have to move for military purposes or you’re in danger or a victim of domestic violence. If you just want to break a lease to move to a new house, it can be a little more complicated.
Lease breaking laws differ by state, so your options (and consequences) may look different depending on where you live. Even if you don’t have a good reason to legally end a lease, though, you’re usually not trapped in it. There are a few methods you might be able to use to get out of a lease, which we’ll go over next.
Methods To Get Out Of Your Current Lease
If you want to get out of your current lease, the first thing you should do is let your landlord or property manager know. It’s usually never a good idea to move out without first alerting your landlord about what’s going on. Before moving, be sure to read your lease agreement’s rules and conditions surrounding breaking a lease and leaving.
Depending on what’s outlined in your lease, your landlord may present you with a few options – but in general, here are some common methods used to get out of rental agreements.
Look For A Home Buying Clause
If you’ve heard that it’s possible to break your lease early if you can provide proof that you bought a new home, that’s not necessarily true. In most cases, you won’t be able to escape a rental agreement with no consequences just because you closed on a house. Some leases, however, might have something called a home buying clause in the agreement. If your lease includes a home buying clause, it means you can terminate your lease early if you’ve purchased a new home as long as you give your landlord or property manager proper notice.
Not all leases actually include a home buying clause, however. If you’ve reviewed your lease agreement and it doesn’t include this clause, you’ll have to find another way to end your lease early.
Buy Your Way Out
Depending on the rules outlined in your lease agreement, you may be able to “buy your way out” of a lease by paying an early termination fee. The cost of this fee will vary based on terms laid out in your lease, but it’s a good idea to expect to pay a minimum of 1 – 2 months’ rent in addition to an added penalty for breaking the lease.
Remember that you should always give your landlord or property manager proper notice before opting to move and break the agreements made in your lease. If you fail to give appropriate notice – usually 30 days minimum – you may be sued and forced to pay for the remaining months’ rent until your landlord can find a replacement tenant to fill the space. Regardless of whether you give proper notice, you might also lose your security deposit.
Switch To A Monthly Agreement
If you warn your landlord ahead of time that you’re buying a home and will need to move, they may be willing to switch your lease term to a monthly agreement rather than an annual one. With a month-to-month lease, you as the renter agree to stay for a month at a time rather than a full year.
A month-to-month lease, if your landlord agrees to it, can give you more flexibility in when you can move out without incurring extra costs for breaking a lease agreement. Your landlord or property manager may require that you pay more for rent in order to have a month-to-month lease, however.
Explain The Situation To Your Landlord
While simply explaining the situation to your landlord might not always end up being very helpful, it never hurts to try. If you’re honest with your landlord about your intentions to move ahead of time, you might be able to work with them and find a solution that works for both parties.
If you live somewhere with a high demand for housing and your landlord can feasibly find a new tenant quickly, they may be willing to minimize the costs you have to pay for breaking the lease. In other situations, you might be able to switch to a month-to-month lease. Keep communication honest, open and timely – you never know what your property manager or landlord might be willing to work with you on.
Whatever agreement or solution you come to with your landlord or property manager – whether it’s breaking your lease and paying an early termination fee or altering your lease agreement – make sure to always get any changes in writing and hold on to them. It’s important to protect yourself by keeping these important documents close in case you need them in the future – and getting everything on paper can help clarify you and your landlord are on the same page with everything as well.
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The Pros And Cons Of Breaking A Lease Early For A Home
While it’s possible to break a lease and leave early to move into a new home, should you? There are benefits to leaving behind the property you’ve been renting for one you own, but there are also some potentially severe consequences for breaking a lease that you should keep in mind.
- You can bid on a house more quickly. You may be wary of making a timely offer on a home, especially during a highly competitive seller’s market, if you’re unsure you’ll be able to move out of the space you’re renting quickly. You probably don’t want to pay for rent and a mortgage at the same time. By breaking your lease, you can, in theory, move out right away, should your offer be accepted.
- Breaking a lease isn’t always expensive. If you’re nearing the final months of your rental agreement and/or your landlord has agreed to work with you on moving out early, breaking a lease isn’t always extremely costly. You may still lose your security deposit or have to pay a fee, but it may be less expensive than you expect.
- Buying a home means building equity. When you buy a house, your payments will hopefully go toward building equity in your investment – whereas when you rent, your money isn’t contributing to financially growing anything. Breaking a lease, if it’s feasible for you, can allow you to start allocating your money toward a growing investment more quickly.
- Your landlord could request payment for the rest of your lease. If you break your lease, your landlord might request that you pay the remaining months’ rent before leaving – and they may even sue you for it, depending on the terms of the lease you broke. Depending on how many months were left in your lease, among other factors in the agreement, this could cost you thousands of dollars.
- Breaking a lease could hurt your credit score. If you break your lease and don’t repay the money you owe in the terms of the rental agreement, your landlord or property manager could file a report with a credit bureau and might even send a collection agency after you to attempt to regain what you owe them. This can have a very negative impact on your credit history that will follow you for years to come.
- You might struggle to rent in the future. If you find yourself renting again in the future, a new landlord or rental company might want to contact your previous property manager or landlord to know whether you are a good and reliable tenant. If you broke your lease, you may not get the good review you were hoping for.
Alternatives To Consider
If you’re interested in buying a home and moving as soon as possible but you’re not sure you want to have to break your lease, there are still other options that might make sense for you. Here are a few actions you could take if you want to move out quickly without having to break a rental agreement.
Sublet The Apartment
Subletting is when you rent out a room or space that you’re already renting to a new tenant that takes over your lease. Not all landlords permit subletting, so this won’t be an option for everyone. Be sure to read the details of your lease agreement and discuss subletting with your landlord before attempting to find a tenant to replace you in your space.
If your landlord or property manager is on board with subletting, it can be a great way to get out of living in the space and dealing with the extra costs – but be careful selecting a new tenant. The lease is still in your name, even if a new tenant is paying rent. If they destroy the space or stop paying rent, it reflects on you.
Ask The Seller To Delay Your Closing
According to the National Association of REALTORS® (NAR), 23% – or almost 1 in 4 – closings experience delays. If you’re at the very end of a lease term, you could discuss postponing your closing date with the seller and other closing parties to attempt to get out of your lease and into your new home around the same time – but be respectful of your seller’s time and understand this won’t always be possible, especially if you have a good portion of your lease agreement left to fulfill.
The Bottom Line: Is Breaking Your Lease Worth It?
If you want to get out of a rental property and into your new home as soon as possible, breaking your lease can sometimes be a feasible option. Depending on the terms and conditions outlined in your lease, you may be able to get out of renting your current space with a smaller penalty than you might expect.
Breaking a lease can also have serious and harmful consequences, however, so you should always do your research and make sure you’re fully aware of the impact breaking your rental agreement could have on your finances, credit and reputation as a tenant.
If you’re ready to stop renting and purchase a home of your own, get started with Rocket Mortgage® today.
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