Pros and Cons of Breaking a Lease to Buy a House

When you sign a lease, you enter a legally binding agreement. But what if you want to buy a house before your lease ends? Here’s what you need to know.

Can You Break a Lease to Buy a House?

Yes, but you usually need your landlord’s permission. State laws may also influence what your landlord can do about your lease. Always get agreements in writing and consult with a tenant’s union or legal aid organization to understand your rights.

Legal Implications of Breaking a Lease

Breaking a lease can lead to legal consequences. Your landlord might take you to court, or you could potentially move out without further liability, depending on state laws. Check your lease and state laws to understand your rights and obligations.

How to Break a Lease to Buy a House

1. Talk to Your Landlord

Explain your situation and ask for permission to break the lease. Your landlord might agree if they can easily find a new tenant.

2. Ask for a Home Buyer Clause

Check if your lease has a clause that allows you to terminate it early if you buy a home. This usually requires giving advance notice.

3. Buy Out Your Lease

Offer to pay an early termination fee, typically 1-2 months’ rent plus a penalty. Be aware you might lose your security deposit.

4. Request a Monthly Lease

Ask your landlord if you can switch to a month-to-month lease for more flexibility. Note that this might come with higher rent.

Alternatives to Breaking a Lease

Subletting

Rent your space to a new tenant. Ensure your landlord allows it and that the new tenant is trustworthy.

Postpone Closing

Delay the home purchase until your lease ends. The seller might agree to adjust the closing date.

Find a New Tenant

Help your landlord find a replacement tenant. This might make your landlord more amenable to letting you break the lease.

Should You Break a Lease? Pros and Cons

Pros
The benefits of breaking a lease to buy a house include the following:

• Can move into a home sooner: Breaking a lease to buy a house allows you to move into a house sooner. Breaking a lease would prevent you from having to pay rent and a mortgage simultaneously, which could put pressure on your finances.
• Become a homeowner: If you have a major goal of becoming a first-time homeowner, it comes with a whole host of perks, including tax breaks, an asset for your heirs, and building roots.
• Start building equity: Equity refers to the amount of money you’ve paid off on your home after subtracting your current mortgage balance and any additional liens from your property’s current market value. In other words, it’s the amount of home that you own. You can borrow from the equity in your home or sell your home for your profit later.

Cons
The challenges or drawbacks to breaking a lease to buy a house include the following:

• Financial loss: Breaking a real estate rental agreement can incur financial penalties, which may not be ideal when you need to save for a down payment and closing costs.
• Damage to credit score: You could experience damage to your credit score if you owe your landlord and skip town. Why? Your landlord could report you to the credit bureaus and possibly even send a collection agency to chase after you to regain what you owe them. It can impact your credit for years.
• Legal implications: You may face consequences if you break a lease illegally. Your landlord could take you to court, and you may incur court costs and other fees due to breaking your lease.

Conclusion

Breaking a lease to buy a house is possible but comes with legal and financial risks. Make sure to understand your lease terms, state laws, and speak with your landlord to explore your options. If you’re ready to start the home-buying process, contact one of our mortgage professionals today for personalized guidance.