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

November 1, 2021 | 5 minute read

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.

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 avoids the headache of trying to circumvent a lease, 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 be prequalified for a loan. Since it can take weeks to execute a mortgage even after being prequalified, meeting your loan officer early takes you one step closer to buying a new house.

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

Plan Ahead

If you know that you’ll be looking for a new house, discuss the option of a month-to-month lease with your landlord. This arrangement will likely cost more 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 at a moment’s notice is a hassle they want to avoid. Others, however, are happy to maintain the money they make from renters, even 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. It could be cheaper to break a lease because, in some cases, the penalty costs decrease the closer a tenant is to the end of a year-long 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. 

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. 

Negotiate a Buyout Clause

A buyout clause 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. 

Ask for a Mortgage Clause

This is a long shot and it’s up to the generosity of the owner, but it’s worth requesting a mortgage clause when the lease is signed. A mortgage clause means the landlord will let you out of the lease at any time without financial penalty if you secure a mortgage. Here’s the catch: a mortgage clause requires a friendly landlord.

Pay the Penalty

In a worst-case situation, 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.

Start your home search by working with a personal loan officer. A lender will help you learn how much loan you can afford to know where you’ll need to save money if there are penalties to break your lease. Your mortgage loan officer can also help you learn about the mortgage timetable, so you’ll know how long you’ll be paying rent.  

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