How to Get Out of Your Lease Agreement to Buy a House

Life is serendipitous, and so is the market for new homes. 

You never know when you are going to find your dream house. Sometimes, if you’re a first-time homebuyer, buying a new home requires getting out of a rental agreement early. Often, financial penalties are imposed when a tenant breaks a lease, many of which can be painful and costly.

Don’t be discouraged, though; it’s possible to make a move before your lease expires. The key is advanced preparation.

The best solution is to time the end of your lease with the start of your mortgage payment. When the market is hot, it’s possible to have a situation where you move into your new house in the same month that your lease ends. Matching the end of your lease with the purchase of your home avoids the headache of trying to negotiate a lease termination, which can be complicated and time-consuming.

The first essential item to take care of before starting your home buying process is to work with a personal loan officer to get prequalified for a loan. Want to get started now? Complete our Quick Start Form and we’ll connect you with a loan officer that matches your specific needs. They’ll provide a free consultation and guide you through every step of the loan application process.

Here are some tips for trying to navigate an early exit from your lease if that’s the only option.

Review Your Lease Terms

If you know that you’ll be looking for a new house and are hoping to move before your lease would traditionally end, review your lease to see if there is a clause for terminating the lease early if you are going to purchase a home – this is sometimes called a mortgage clause. Also ensure you understand what notification period is required for ending your lease (often 30-60 days). Checking into these items may eliminate you having to worry about taking the steps outlined below. If your contract doesn’t outline whether or not this is an option, you can contact your landlord to try to discuss; they may be more agreeable to early termination if you are purchasing a home instead of just moving to a different apartment. If an early termination exception isn’t available, also check the lease for allowance of re-letting or subletting your apartment to finish out your lease.

Re-letting

If you have a friendly landlord, they might allow for an early departure, especially if the market for renters is booming. Renting to new tenants could also allow a landlord to change the contents of a lease to charge more to a new tenant for the vacancy. 

In an option called re-letting, offer to help your landlord find another full-time tenant. Check your state laws for tenant rights regarding re-letting. Re-letting can be better for landlords because they don’t have to incur the hassle of finding a new tenant. 

Sublease

Check your lease for language about subleasing. If you decide to sublease, you will have to do the hard work finding a renter to finish out the terms of your lease.

An example: If your lease expires three months after you close on your house, you’d need to find a tenant for three months. Subletting is popular among college students who hold a rental over the summer to keep a desired apartment when they return to school. It is important to check into this option to ensure not just the allowance for subletting but what liability could remain on you if the person were to do harm to the property or stopped paying. 

Be aware that there are laws that cover subletting in every state. A tenant who subleases an apartment could be subject to a credit check. It’s vital to check those laws in individual states to make sure that subletting is allowed. 

Pay the Penalty

In a worst-case scenario, you’ll have to pay the penalty for breaking the lease. It’s often a small price to pay when you consider a home is a 30-year investment. We can’t understate the value of moving into a house that you own but fully understanding the costs is imperative to understanding the feasibility of next steps. 

Plan Ahead

If you are not currently in the middle of a lease but know you will be entering one soon but also anticipate wanting to purchase a home before a traditional 12-month lease would be up then you have two primary paths to consider:

Month-to-Month Lease

Before executing a lease discuss the option if a month-to-month lease is available with your landlord. This arrangement will likely cost more monthly than a traditional 12-month lease, but it gives you flexibility. You also won’t have to worry about timing the purchase of your new home at the end of your lease. 

Month-to-month leases are the easiest way to avoid breaking a lease. Many renters who don’t want to commit to a year-long lease will sign month-to-month leases or shorter-term leases like three months or six months. 

Be prepared that some landlords won’t offer these shorter leases because the inconvenience of finding a new tenant and having to prepare the property for that new tenant in a relatively short time. Others, however, are happy to be able to collect a higher monthly rent amount in exchange for the short term. 

If you are considering a month-to-month option, it’s critical to look at the terms of the lease. Weigh the cost of breaking the lease with the extra monthly expenses of the rent before making a decision and ensure you understand that you will still have to provide proper notice to the landlord when you do intend to move. It’s important to understand that most leases still require a minimum 30 day notice to terminate the lease. 

Negotiate a Buyout Clause

In this option you would stick with a traditional lease but request a buyout clause which allows a tenant to anticipate the cost of breaking a lease for any reason. If you know you’ll be house hunting while you’re renting, try to include a buyout clause in the lease before it is signed. 

Prudent landlords may have already included a buyout clause in the lease. It’s essential to check your lease first to determine if a buyout clause is already in effect with a signed lease. In some cases, it might be cheaper to just break the lease. 

Ready to start your home search? Find a personal loan officer to get the process started. A lender will help you learn how much loan you can afford monthly and approximately how much money is needed at closing so when you are considering the cost of breaking a lease you can have a full picture in mind. Your mortgage loan officer can also help you learn about the mortgage timetable, so you have a better understanding of how that plays into your lease.