If you’re a renter and planning to buy your first home, it’s undoubtedly a big step in your life. It also raises an important question: what happens to your lease if the right home comes along before it ends? The short answer: you can break a lease when you buy a house, but purchasing a home doesn’t automatically let you leave without penalties. What happens depends on the terms in your lease and the laws in your state.
In this Redfin article, we’ll answer your questions about breaking a lease if you buy a house. Whether you’re in the process of buying a house in Cincinnati, OH, or beginning to look at homes for sale in Raleigh, NC, here’s what to consider if you need to end your lease.
Key takeaways
Buying a home alone typically isn’t a legally protected reason for early termination.
You can break a lease to buy a house, but there may be financial repercussions.
Read your lease agreement to understand any consequences of ending a lease early.
Consider negotiating with your landlord about fees, finding a new tenant, or subletting.
Can you break a lease if you buy a house?
Yes, you can technically break a lease if you’re buying a home, but there may be consequences. The outcome depends on the terms of your lease agreement and the steps you take to end your lease.
Possible consequences
A lease agreement is a legally binding contract between you and your landlord or property manager, with the expectation that both parties will abide by the terms and conditions outlined in the agreement.
If you break a lease early, you’re technically breaking the contract – unless you’re within your rights to do so as outlined in the agreement. One common consequence of breaking a lease early is financial penalties. These can be costly, which could impact your homebuying budget or your credit score.
Reasons you can break a lease
There are several reasons you may be able to break a lease without repercussions – but buying a home is generally not one of them. Valid reasons often include:
You’re active duty military being deployed or reassigned
You’re a victim of domestic violence
Your lease agreement was illegal
Your landlord has not sufficiently maintained the property as outlined in your lease
Your landlord has broken the terms of the lease
There are usually steps you need to follow, such as proper notice to vacate or submitting a letter to your landlord. Laws vary by state, so be sure to consult with an attorney.
How to get out of your lease in order to buy a home
There are several options you can take to better understand how to get out of your lease if you’re in the process of buying a home. Here are some of the things you can do:
Review your lease agreement
The first step is to review your lease agreement. This document will show what reasons you may be able to break your lease without penalty, what happens if you break a lease early, and possible other options.
You may find any of the following in your lease agreement:
Early termination fees: If you break your lease early, it’s likely you’ll owe an early termination fee. This is often a one-time payment, ranging from 2 to 4 months’ rent. You may also lose your security deposit or have additional fees associated with finding a new tenant.
Lease buyout: You may have the option (or in some cases may need to) buy out the rest of your lease. This means paying all the remaining rent for your lease. If you have several months left in your lease, this could be costly.
Mortgage clause: While uncommon, it’s possible that your lease has a home buying or mortgage clause. This clause may allow you to terminate the lease if you’re buying a house. These usually require additional proof and extended notice (often 30–60 days).
Speak to your landlord
Depending on the options outlined in your lease agreement, it’s time to speak with your landlord or property manager. It’s possible that they may be willing to negotiate with you. If there’s a high demand for rentals in your area, they may be willing to let you break the lease early. Some other options include asking for a reduction in the early termination fee, adjusting the notice period to vacate your unit, or offering to find a new tenant.
Change to a month-to-month agreement
You can also ask if your landlord will switch your lease to a month-to-month agreement. A month-to-month rental agreement gives you more flexibility as you won’t be tied to a year-long lease. Usually, you only need to give 30 days’ notice before vacating. However, month-to-month agreements can be more expensive than a long-term lease agreement.
Keep all records and documentation
No matter how you end your lease, keep all communication with your landlord including emails, messages, any documents you’ve signed, previous and new rental agreements, current and past payments, etc. Any changes to your lease agreement should be in writing and signed by both parties. If there are any issues, you’ll have all the necessary documents.
Pros and cons of breaking a lease to buy a home
Pros of breaking a lease
Buying the right home: If you’ve been looking for a home and found one that meets your needs, budget, and long-term goals, then it may be right for you to break your lease early.
Financial penalties may be manageable: Depending on what’s outlined in your lease agreement, it may not be as expensive as you anticipated to break your lease. For example, if you’re near the end of your lease the early termination fees may fit into your budget.
Building equity sooner: Buying a home lets you build equity. If you’re in a good financial position, buying a home now lets you start building equity sooner rather than paying rent for months to come.
Cons of breaking a lease
Financial penalties: It could be costly if you need to buy out our lease or pay for multiple months of rent as a penalty for breaking your lease early.
Potential credit score impact: Your landlord could report your broken lease to a credit bureau, which may impact your credit score. If you don’t make proper payments or stop paying your rent, this can also impact your credit score, and your landlord could send you to debt collections.
Impact on rental history: Breaking a lease is typically noted on your rental history report. This can make it difficult to rent in the future. Should you need a reference from your landlord in the future, they may not be willing to give you a good reference.
Alternatives to breaking a lease
There are a few alternatives to breaking a lease, some of which we’ve covered above.
Negotiate a lease buyout
Sometimes a lease buyout may be your best option. This avoids having a “broken lease” on your rental history and may cost less than an early-termination fee if you’re close to the end of your term.
Sublet your apartment
If your lease allows subletting, you can find a subtenant who pays you rent for the remainder of the term. Your landlord may still need to approve the tenant, and you remain responsible if they default on rent.
Find a new tenant
Also called “assigning the lease,” your landlord may let you find a new tenant who will sign a new lease for the apartment. Your landlord may allow you to break the lease with fewer consequences, as long as you have found a new tenant for the unit.
Negotiate a later closing date
If you’re in the process of buying a home, consider negotiating a later closing date. This can be especially helpful to the seller if they are in the process of buying a new home, as it gives them more time to close the deal.
Should you break a lease to buy a house?
Ultimately, breaking a lease if you’re buying a home depends on your finances and homebuying goals. If you don’t plan on renting again in the future and the early termination fees aren’t as costly as you anticipated, then it may make sense to break your lease. However, if you need to pay for multiple months of rent as a consequence of breaking the lease, it may make more sense to wait to buy a home.
