Buying a new home is a big investment, and when you find the perfect one, you want to be able to submit an offer right away. Even if the down payment, closing costs, and paperwork are all organized, you can find yourself hindered by one other thing: A long-term rental lease.
Twelve-month leases tend to be the most common, and there’s no guarantee the end of the contract will line up with when you want to move into a new home. This could put you in the unfortunate position of either breaking a lease early (and facing possible consequences) or paying rent and a mortgage until your lease expires.
So what can you do in this situation? There are a few options, but first, let’s look at why someone might want to break a lease early.
Pros of Breaking your Lease
Moving into your New Home
This one is obvious but it’s worth repeating: Being able to make a move on a dream home requires being able to act quickly. Breaking your lease is one way to do so.
Building Financial Equity
Buying a home means putting your dollars toward improving your financial stability, which is something we’d all like to do. Since renting doesn’t grant you ownership, you’re not getting a return on your investment each month when you pay rent.
Cons of Breaking your Lease
Expenses
If you decide to move out early, your landlord may require you to pay some or all of the owed rent in addition to penalty fees. Since you did sign a contract to live in the rental for a designated time frame, they have the legal right to do this. Plus, you might lose your security deposit by exiting the contract early.
Credit Score Damage
If your landlord does charge fees and you refuse to pay, it can negatively impact your credit score, making it difficult for you to open a new line of credit in the future. While your mortgage application might not be impacted, you may face challenges when you need to make other major purchases.
Legal Ramifications
The rental landlord can, if they so choose, decide to pursue legal action and sue you for terminating a lease early. Even if this is resolved in your favor, a court visit will stain your credit report, making it more difficult to rent elsewhere if the need arises.
How can I break my lease?
If you want to move forward, be sure to familiarize yourself with your local policies. Laws on lease-breaking vary from state to state, so step one is knowing what you’re getting yourself into.
That being said, here are some ideas on how you can break your lease.
Look for a Homebuying Clause
Most people skim over their rental lease agreements and quickly sign at the bottom, but in situations like this, it’s worth it to take an extra look. Review your lease to see if it has a homebuying clause, which allows renters to end the lease shortly after moving into a new home. While it’s not guaranteed such a clause exists, it would be a ‘get out of the lease early’ card you can play.
Sublet or Reassign your Apartment
Your landlord might let you out of the contract early if you can find someone to take over your rent for the remainder of the lease. Remember that subletting means someone else will be responsible for paying rent but the lease remains in your name, so be selective about your tenant: Anything they do will reflect on you.
On the other hand, reassigning means ending your lease and having someone else assume all obligations. If you can find a candidate who meets the renting criteria, this saves the landlord the trouble of finding someone themselves.
Talk to your Landlord
Sometimes it’s less about the contract and more about the relationship. If you think you might need to break your lease, engage your landlord in the conversation early on. They might be willing to work with you and find a way for you to break the lease without either party being inconvenienced. Worst case they’ll say that can’t help you, so it’s worth a try.
Work with the Seller
If your landlord won’t budge, try your negotiation skills: The seller may agree to pay closing costs. If this offsets the penalties and fees you’ll end up paying for breaking your lease, it could be worth it.
If a seller is pressed to close a deal on a house, they might consider a lease buy-out option. While this rarely happens, there have been cases where a homebuilder is willing to put money toward breaking a lease early so homeowners can sign a contract.
Either way, be reasonable with what you’re asking of the seller. If you’ve already received discounts and upgrades on your new home, they may be less likely to accommodate further requests.
Is breaking a lease worth it?
Unfortunately, that depends on each situation. Look closely at your finances and consider the pros and cons of stepping out of a contract early. If you think you’ll be better in the long run, breaking a lease can be financially advantageous. However, if you’re not in a rush and confident more options will be available on the market, holding out and finishing the lease agreement is likely worth it.
Kian Zozobrado joined Builders Digital Experience (BDX) in 2019 as a content writer. A graduate of Southwestern University with a degree in English, Kian is passionate about the written word and making connections. Outside of work, Kian also serves as president of the Board of Directors for the Writers’ League of Texas.
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Charles Bado
I want to buy my first home and was told by a friend that a lease can be terminated once I purchase my first time home.
Is there any truth to this?
Fred Hopkins
Hi Charles, it would be best for you to read your lease and talk to your landlord about any applicable clauses. You could speak with an attorney as well.
Chely
We are currently in a lease, we let them know 60 days ago that we would be doing month to month after August til we found a home. We found a home quicker than expected and will be closing the first week of August. Our original lease is up July 31st. At this point we can do a 30 day notice although there is no clear instructions for once we have said month to month on what applies as a timeframe for a notice. But since we have stated that we want month to month does that allow us to give less notice? What would we be liable for at that point?
Jamie Garcia
Hi Chely,
You need to contact your landlord and explain your situation as soon as possible. Your landlord will tell you what your options are.
Michael A Taylor
The “Month to Month” agreement indicates how you plan on managing your “rental” rate – and it would be evaluated each “month”. The “notice to vacate” would remain the same in any term lease. In this case 30 DAY. However, you will want to see if there is a stipulation in the lease that says something like, “all notices are subject to the last day of the month” (or something like that). You will want to make sure that the 30 day notice starts the count on the day that you actually GIVE the notice. Also, many, if not ALL states require that you give your notice IN WRITING.
GRT
I received my final closing cd, but my loan processor is asking me for the details for breaking my lease. The fees are $5051, which is not bad considering my lease runs through Apr 2021. I close on my house Jul 31. Will they make me pay the lease breakage fees?
Jamie Garcia
You will need to speak with your landlord and your attorney for more clarification on your specific situation.
Fred Hopkins
I won’t speculate on exactly how bad the eventual collection or judgment (if they sue) will affect your credit score. Both will have a major detrimental effect. However, keep in mind that a mortgage underwriter will ask your apartment complex to complete a VOR (verification of rent). If you are delinquent on your rent, you will not likely get approved for a mortgage.
Abdul
We close on a house next month but our lease isn’t up until June. Could we ask for a check at settlement to pay the land lord and just add it on to our mortgage
Fred Hopkins
No, unfortunately. The only that will be financed with a purchase mortgage is the actual purchase of the home minus your downpayment. Closing costs and any seller incentives are handled at close and have an effect on how much money you will have to bring to the table. The loan’s underwriter will verify your rent is up to date so be sure that you are making those payments as required. They may even ask for a copy of the lease. This verification will likely alert the landlord that you are going to be moving.
Pat
I am in the process of closing, my lender wants me to break my lease before closing. I n worst cast sernerio I don’t close where am I to live with my disabled husband.
Jamie Garcia
Hi Pat,
You should speak with an attorney as to whether or not you must break your lease before closing on your new home, as well as with your landlord.
Anthony McIntyre
Signed to renew lease in November 2020. Lease up in December that yr. Gave notice of home purchase 30 days prior to lease up in December. Closed 12/18/20. Apt called it a Notice to vacate. All I got back was security deposit this was my first apt. Wasn’t i supposed to receive that and 1st months rent?
Jamie Garcia
Hi Anthony,
Typically, when you end your lease, you may (or may not) receive your deposit back, but you do not receive any refund on rent. Your deposit is a safeguard for damages that may occur. If you abide by the terms of your lease and leave your apartment in pristine condition, you may receive all or part of your deposit back. Your rent, however, is the cost to live in the dwelling and is not returned to you.
Robert Pendarvis
This is Robert my neighbor wants me to buy his home but I’m in a middle of a 12 month lease canI ask the realtor if I can go month to month please help
Jamie Garcia
Hi Robert,
Talk with your landlord to discuss your situation and your options for breaking your lease early.
Richard D
Hi,
I live in Colorado, we are closing to our new house end of February. Our one year lease in our apartment is due end of May. Is it required to pay the liquidated damages for breaking the lease?
Jamie Garcia
Hi Richard,
You should talk to your landlord to determine what fees, if any, you are responsible for if you break your lease early tp buy a home.
Elizabeth P.
We would like to buy the condo we currently lease. However, our lease doesn’t end until November. The landlord is open to selling us the condo now before the end of the lease. Do we need to incorporate the remainder of the rent in our offer?
Jamie Garcia
Hi Elizabeth,
If your landlord is willing to sell you the condo, rather than continuing to rent it to you, you would cease paying rent and begin paying a mortgage payment (to your lender – not to your former landlord). Once the sale is complete, the landlord no longer owns the condo, you do!
Tereasa Godwin
Our lease was up in our current place may of 2019. We recently advised our management company we are looking to buy a home probably around August she just sent us a paper renewing our lease for another year. Will we be able to get out of this if we purchase a home in different city.
Jamie Garcia
Hi Tereasa,
You should speak with your landlord before signing a lease renewal and explain that you only want your lease to continue through August. Your landlord should outline your options for ending your lease in the next few months.
Annie Terrell
We are on the lease until March of 2021 in the meantime we are purchasing a home in another city. closing in August .will it be possible to break an apartment lease?
Jamie Garcia
Hi Annie,
You need to discuss ending your lease early with your landlord or apartment management.
Rose
I am in a lease agreement till sept.2022, I’m in process of looking for a small home. If I give my leasing office more than enough notice saying Im buying a home and will vacate in March 2022 breaking the apt. Lease early will I be able to get my deposit back? And or what steps shall I take to properly be able to get my deposit back without owing the leasing office any balance?
Jamie Garcia
Hi Rose,
These are all questions you need to ask your landlord or leasing office management.