Should You Break Your Lease To Buy a Home?

Most people start out their adult lives renting a home until they’re ready to buy one. If you’re presented with a homebuying opportunity, you may wonder: Should I break my lease to buy a house?

Breaking a lease to buy a house is a big decision that comes with pros and cons worth thinking through before making the move.

Is It Easy To Break a Lease To Buy a Home?

How difficult it is to break a lease depends on the terms in your agreement, your landlord, and the laws in the area you’re renting in. Remember, your lease is a legal contract that typically can’t be broken without penalty unless both parties agree, or there’s legal grounds for termination. 

For some tenants, it may be as simple as asking an understanding landlord to let them out of the lease. If that doesn’t work, you may need to explore other ways to get out of a lease to buy a house.

When Should I Break My Lease To Buy a Home?

Don’t break your lease the moment you find a house you like — purchasing a home is a long journey. The time between searching for a home and getting handed the keys could be months, and you’ll need somewhere to live in the meantime. On the other hand, breaking your lease too late in the homebuying process could require you to pay both rent and mortgage payments.

“I suggest trying to extend the closing date of the house you are purchasing to reduce the time on your lease,” says Erin Hybart, a Realtor at Clients First Realty LLC in Baton Rouge, Louisiana. “If it is possible to extend your closing out a few weeks, the lender may also be able to defer your first payment for 60 or 90 days, thereby reducing the time you incur extra financial burden.”

Advantages of Breaking a Lease To Buy a Home

To help you decide if you should break a lease to buy a home, it’s important to consider the pros and cons.

Here are some advantages:

• Your landlord may let you out of your lease if you ask. Explaining your situation honestly could result in a simple, penalty-free lease termination. Breaking a lease could be easier than you anticipated. 
• You can move into your new home sooner. Among the many benefits of buying a home, becoming a homeowner sooner means you can start building equity. This can be an exciting opportunity, considering one of the disadvantages of renting is your monthly payments don’t contribute toward your home’s equity.
• You avoid overlapping rental and mortgage payments. If you don’t break your lease and you close on a home, you could find yourself juggling two expensive monthly payments. Plus, your rented unit will be sitting idle.

“The No. 1 factor I will always say is usually you cannot go wrong paying your own mortgage over someone else’s,” says Rebecca Hidalgo Rains, a broker for Integrity All Stars at Berkshire Hathaway HomeServices in Mesa, Arizona. “When you are a tenant, you’re essentially paying someone else’s mortgage.”

Disadvantages of Breaking Your Lease To Buy a Home

This decision is not without its disadvantages. These include:

• It could cost you. “The No. 1 one issue is the cost associated with breaking a contract,” Rains says. “You could be on the hook for paying the rest of your lease.” Unless you work out an alternative agreement with your landlord — such as finding a subtenant — you should be prepared for these costs. 
• It may affect your ability to rent in the future. Future landlords could ask for references from past landlords, and a broken lease won’t work in your favor. This is especially true if you ended the landlord-tenant relationship on bad terms. 

Pros vs. Cons of Breaking a Lease To Buy a Home

Here’s a recap of the pros and cons of breaking a lease to buy a home:

5 Tips for Breaking Your Lease To Buy a Home

If you feel strongly about ending your lease prematurely to pursue homeownership, here are some recommendations on how to do it right:

1. Carefully review the details of your lease agreement. There could be a buyout clause in the fine print that you forgot about. 
2. Talk to your landlord. You never know your options until you ask. Your landlord could want to end the lease to renovate the unit, and ending the lease would be a win-win.
3. Get everything in writing. Even if your landlord verbally agrees to break the lease, it’s important to get their confirmation documented. Look into getting a lease termination agreement.
4. Keep all your documentation. Keep all paperwork, lease documents, and written agreements associated with breaking the lease — even after you move out.
5. Seek advice from a real estate professional. Real estate agents and lawyers are experts in homebuying, and they may be able to help.

Is Breaking a Lease To Buy a Home Worth It?

A major decision, such as breaking a lease to buy a home, is best approached by weighing the pros and cons, conducting research, and enlisting professional help. Understanding the specifics of your situation is the best way to facilitate a smooth end to your days as a tenant, and start a rewarding life as a homeowner.

FAQ

Here are answers to some frequently asked questions about the pros and cons of breaking a lease to buy a home. 

What are some ways to make the lease termination process easier?

One way to make the process of breaking a lease easier is by communicating your situation honestly to your landlord. They may be willing to work with you to find a solution, or simply agree to end the lease.
Another way that requires some foresight is to include a homebuying clause in your lease agreement. If you have a homebuying clause, you simply need to enact it and give your landlord proper notice.
“Be upfront with the landlord and have something already in play, like a longer move-out notice period, so you will know how the landlord will react,” Rains says.

How can I break my lease legally in California without penalty?

Depending on the state you live in and local laws, there are several situations when you can break your lease without penalty. For example, in California, you can legally end your lease early if you’re a military service member being deployed, you’re a victim of domestic violence, your landlord invades your privacy, or it’s unsafe to live in your rental.