Buying vs. Renting
Most military personnel shy away from buying a home because they know another move is in their future. But if your family falls in love with the area and community, buying may be an option. Here are the pros and cons of both.
Buying: Owning a home may be part of the American dream but it doesn’t always match the lifestyle of military families. Here is a breakdown of the pros and cons of buying a home.
Pros:
- Mortgage interest, taxes and most mortgage loan points are tax deductible
- Property usually builds equity
- Access to VA loans
- Not dependent on anyone to maintain or fix the property
- Tax-free allowances to cover costs of housing
Cons:
- Responsible for property taxes
- May have trouble selling or renting only after a few years in the home
- Closing costs, insurance costs
- General maintenance and repair costs: appliances, landscaping, etc.
- Damage to the home if rented out
Renting: Deferring home ownership to renting may be the safer option especially if another relocation is forthcoming. However, renting has its own share of good and bad features.
Pros:
- Lower upfront costs
- Barely any maintenance costs
- Lower monthly costs
- Save money each month if your rent is below your Basic Allowance for Housing (BAH)
- Easier to move with little notice
Note: Ask for a military clause in your lease, it allows the lease to be broken in the event of a call-up to active duty, reassignment or other military-related issue.
Cons:
- A terrible landlord
- Not able to build equity in a rental
- No control over rent increases
- No tax benefits
- Possibility of no pets or children allowed
Living on Base
Another option for military personnel is to live on base. For some families it’s an enjoyable atmosphere, for other families it just doesn’t work. Let’s look at the general pros and cons.
Pros:
- Living costs covered including utilities
- Very little commute to work
- Easy access to post facilities such as the Commissary, BX or PX, MWR centers
- Military police on patrol gives a sense of security
- Support network from neighbors living the same lifestyle
Cons:
- Unavailability of base housing or a long waiting list
- Subpar conditions of housing, can be cramped and not filled with many amenities
- School zones: If your base doesn’t have a school you could be stuck sending your kids to a school you don’t like
- No BAH, so you don’t have the opportunity to save extra money
- Strict rules and covenants on house and lawn maintenance
Housing Allowance
Housing allowances offered to military personnel and their families vary. Here is an overview featuring some of those allowances, which help cover the costs of housing in the civilian community. Examine this Military One Source website for additional assistance.
- Basic Allowance for Housing (BAH): Military.com says BAH… “provides uniformed servicemembers accurate and equitable housing compensation based on housing costs in local civilian housing markets, and is payable when government quarters are not provided.” The Office of the Secretary of Defense provides an analysis of the different types of BAH.
- Overseas Housing Allowance (OHA): This allowance offsets the costs of military personnel living off base outside the continental United States (OCONUS). It covers move-in costs, utilities, and maintenance.
- Family Separation Allowance (FSA): When your family cannot live with you either when you are stationed in the U.S. or outside the country you qualify for this allowance. Check with your installation housing office, the RAP office, or visit the Defense Finance and Accounting Service (DFAS) website.
- Dislocation Allowance (DLA): DLA assists with various moving costs and is usually paid once per permanent change of station. It is available for military personnel living inside and outside the U.S., but it is not available if you are assigned to government quarters and not accompanied by family members.
- Temporary Lodging Expense (TLE): Designated for personnel moving inside the U.S. It moderately offsets costs of lodging and meals when you need temporary housing.
- Temporary Lodging Allowance (TLA): Meant only for overseas duty station personnel, TLA partially offsets the cost of temporary lodging and meals while you wait for government housing or find housing off the installation.
Mortgage Basics
Many service members qualify for alternative mortgage options such as a Veteran’s Affairs loan (VA) and a Federal Housing Administration loan (FHA). Both loans don’t demand a high down payment and credit score, which makes it easier to secure the money.
- VA loan: VA loans are insured by the Department of Veterans Affairs. To be eligible you must be a current or former member of the U.S. armed forces or the current or surviving spouse of one. The advantages of a VA loan are a reduced down payment and interest rate, which saves you money, but there are limits to the loan amount. Military.com states the 4 Keys to a VA loan approval.
- FHA loan: FHA loans are government insured and are especially helpful to homebuyers that don’t make a lot of money and are struggling to save for a large down payment. But an FHA loan generally demands a payment for an upfront mortgage insurance premium (UFMIP) and a monthly mortgage insurance premium (MIP), which adds to the initial cost.
Service Members Civil Relief Act (SCRA)
The Department of Justice states that the SCRA covers issues such as rental agreements, security deposits, prepaid rent, eviction, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosure, civil judicial proceedings, automobile leases, life insurance, health insurance and income tax payments. For housing purposes it:
- Reduces or caps interest rates on mortgages before you enter active duty to six percent per year for period of active duty
- Protects against evictions ? as long as the rate does not exceed a certain amount per month
- Allows you to terminate property leases
- Provides relief from foreclosure and forced sales
