Breaking A Lease To Buy A House: Can (And Should) You Do It?

If you’re house hunting or considering starting the process while still leasing your current place, you may wonder what’ll happen if you need to break your lease to buy a house.

You might think that finding and buying the perfect home will take a while — maybe even until your current lease runs out. After all, you’ll likely tour several homes before you find the right one, and then you’ll still need to go through the inspection, appraisal and closing processes.

However, everything can happen quicker than expected, leaving you with a tough decision. Do you face the repercussions of breaking your lease to buy a house? Are you even allowed to do this?

Can You Break A Lease To Buy A House?

Yes, you can usually break your lease after discussing it with your landlord, but you should be prepared to pay a penalty fee.

In general, it’s legally justifiable to break a lease in extreme circumstances – such as your apartment becoming uninhabitable, having to move for military purposes or being in danger or a victim of domestic violence. But if you want to break a lease to buy a house, it can be a little more complicated.

Lease-breaking laws differ by state, so your options (and consequences) may differ 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. You might be able to use the following methods to get out of a lease.

How To Get Out Of A Lease

If you want to get out of your current lease, you should let your landlord or property manager know. Moving out without first alerting your landlord is rarely a good idea. Before moving, be sure to read your lease agreement’s rules and conditions surrounding breaking a lease.

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

Some leases might have something called a home buying clause in the agreement. If your lease includes a home buying clause, you can terminate your lease early if you’ve purchased a new home as long as you give your landlord or property management company proper notice.

Remember, not all leases actually include a home buying clause. 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 usually 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 moving and breaking 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 new tenant to re-rent your space to. You might also lose your security deposit regardless of whether you give proper notice.

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 for a full year.

If your landlord agrees to a month-to-month lease, you can get more flexibility on when you can move out. And you won’t incur extra costs because you’re not breaking a lease agreement. However, your landlord or property manager may require that you pay more for rent to have a month-to-month lease.

Keep Records

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 keep the paperwork handy.

It’s important to protect yourself by having these important documents close in case you need them in the future – and getting everything on paper can help clarify that you and your landlord are on the same page with everything.

The Pros And Cons Of Breaking A Lease To Buy A House

While it’s possible to break a lease to move into a new home, should you? Leaving behind the property you’ve been renting for one you own comes with benefits, but breaking a lease comes with some potential consequences that you should keep in mind.

Pros Of Breaking A Lease To Buy A Home

Breaking a lease in exchange for buying a permanent home in which you can build equity has many benefits.

Breaking A Lease Lets You Bid 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, but by breaking your lease, you can, in theory, move out right away if your offer is 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 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.

Cons Of Breaking A Lease To Buy A Home

Now we’ll look at some of the potential consequences of breaking a lease to buy a home.

Paying The Remainder 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.

Hurting 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. This can have a negative impact on your credit history that’ll follow you for years to come.

Impacting Your Rental History

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 Breaking Your Lease

If you’re interested in buying a home and moving as soon as possible but are not sure about breaking your lease, other options 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 Your Apartment

Subletting is the act of renting out the room or space that you’re already renting to a new tenant who 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 pays rent. It reflects on you if they destroy the space or stop paying rent.

Ask The Seller To Delay Your Closing

According to the National Association of REALTORS® (NAR)^®, over 10% of 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.

However, you’ll want to 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.