Ideally, you have thought about this before you even offered on a home. The latest this is usually discussed is while drafting your offer on your dream home. Review your lease to see what the termination requirements are. Some leases stipulate a 60-day notice while others only require 30 days. It will vary from lease to lease.
Related Reading: Steps to Buy a Home
It’s important to provide yourself with a buffer for unforeseen circumstances. A real estate transaction can fall apart at any time and a buyer is given many opportunities to “walk away” at any point in the contract period. The transaction becomes most likely to fall apart during the inspection objection and resolution deadline or when the appraisal comes back. All the deadlines such as the inspection objection, resolution or appraisal deadlines are listed in your contract. The appraisal usually happens after the inspection and we see the appraisal come back with a value -depending on the kind of loan you are getting- 5 to 10 days prior to closing. We have seen appraisals come in the day before closing which can end up a bit stressful for all parties.
If you choose to terminate your lease at the time of offer acceptance, you will have fewer options if you decide to rescind your contract should something unacceptable come up before closing. If the appraisal value comes back low or there are significant issues with the house that make you decide to cancel the contract, you will be without a place to live if your lease is already terminated.
Pro Tip: Terminate your lease after the appraisal comes in. You don’t have to make your first mortgage payment until the first of the next month. For example, if your closing is March 15th, then your first mortgage payment is on May 1st. This gives you a little more breathing room for the final move out on April 15th or 30th and gives you enough time to move out, move into your new home, and clean or make repairs in the old one. You won’t have to pay rent AND mortgage at the same time for that first month. This also gives you a buffer should your contract fall through.