Moving from one installation to another can be very stressful. One of the biggest stressors can be determining where to live once you move. Before deciding whether you will buy or rent at the new installation, it's a good idea to consider the pros and cons of each.
Benefits of renting
There are many benefits to renting a home or an apartment at your new installation instead of buying a home. These are some of the benefits:
- Little to no responsibility for maintenance - When renting a home, the responsibility of maintaining the appliances, making repairs and improving the physical appearance of the home is on the landlord. Your lawn is often taken care of by a maintenance crew. This allows you to save some money by not having to buy lawn gear and supplies. And, if your spouse is deployed, it's one less thing on your mind.
- Lower up-front costs - When renting a home, you typically must pay the first and last month's rent and a security deposit before moving in. This amount is usually far less than paying the closing costs associated with buying a home.
- Lower monthly costs - Typically, mortgage payments are more costly than monthly rent payments. If you are receiving basic allowance for housing, you will receive the same amount whether you rent or buy. Because of this, if your rent is below your BAH, you can save money each month.
Easier to cope with unforeseen circumstances - If your family experiences financial trouble resulting from an illness or loss of a spouse's job, the lower cost of renting will make it easier to handle.
- Ease of moving - Selling a home can be a difficult and complicated process that can take more time than you have available. When renting, you have more flexibility to choose where you want to live and can move whenever your lease is done.
Benefits of home buying
There are also many benefits to buying a home or apartment at your new installation. These include the following:
- No bad landlords - The world is full of bad property owners. When you are renting, your health, safety and welfare may rest in the attentiveness of your landlord. If you have repairs in your home that never get fixed or get fixed too late, these may affect the quality of life for you and your family. As a property owner, you are able to fix things whenever you need.
- Ability to personalize your home as you see fit - When renting, you will have to check with your leasing company or landlord as to what can be done to personalize your home. Although many landlords will let you paint, hang pictures or keep up the landscaping on a rental home, some will not. When you own the home, you can change doorknobs, countertops and cabinets to your liking or paint the interior or exterior whatever color you want.
- Tax advantages - As a homeowner, you can deduct on your federal and state income taxes the amount of mortgage interest and real estate taxes you pay each year if you itemize deductions. Money paid to rent cannot be deducted from your taxes.
- Equity - When renting a home, you will not benefit from appreciating value of a home. Simply stated, you will never get your money back when renting. While in an appreciating home market, the sale of your home can lead to great financial gain in the future. If your monthly mortgage payment is less than your BAH, you will be able to build equity in a home without having to pay for it. If you make improvements to the house, you may also be able to raise the selling price of your house.
The "military clause" when renting
A military clause is a statement in a lease that allows the lease to be broken in the event of a call-up to active duty, reassignment or other military-related issue you may encounter. While the Servicemembers Civil Relief Act requires landlords to allow military personnel out of leases in specific situations, a military clause can provide additional protections for you and your family. Although such clauses are common in housing around military installations, you should read the clause carefully and request a military clause if a lease does not contain one.
Housing protections under the SCRA
The SCRA is intended to help protect the legal rights of members called to active duty. It applies to active-duty members of the regular forces, members of the National Guard when serving in an active-duty status under federal orders, members of the reserve force called to active duty and members of the Coast Guard serving on active duty in support of the armed forces. Regarding housing issues, the SCRA provides you the following protections:
- Prohibition of evictions from rental units - If you are renting your home or apartment (with rent below a certain amount), SCRA protects you and your family from being evicted for a period if you can prove that your military service materially affects your ability to pay rent. If the landlord continues to attempt to evict or actually succeeds in evicting you or your family while you are protected under SCRA, the landlord may be subject to sanctions such as fines or imprisonment.
- Reduced interest on mortgage payments - Under the SCRA, you can limit the interest rate for all financial obligations (including mortgages) that you entered into before beginning active duty to six percent. Additionally, the SCRA prohibits lenders from accelerating the principal amount owed and forgives the excess interest payments that would have been due under the higher interest rate. This protection under the SCRA does not apply to financial obligations entered into while on active duty, federally guaranteed student loans and some other types of financial obligations.
- Prohibition of foreclosures - If you are unable to maintain the terms of a mortgage due to your military service, your property cannot be foreclosed on without a court order under the SCRA. Under certain circumstances, you may also request a stay of proceedings to stop a foreclosure or repossession.
- Termination of residential leases - If you are just entering service, you may terminate residential leases and rental agreements without penalty under SCRA. To do this, you will have to show that you entered into the lease before you entered active duty and that you are on active duty for a minimum of 90 days. You will also be required to provide your landlord proper written notice and a copy of military orders. If you entered into a lease or rental agreement after you began active-duty service, you may still be able to terminate your lease without penalty under the SCRA. Active-duty service members receiving permanent change of station orders or deployment orders for a period of more than 90 days also qualify under the SCRA to end their rental agreements without repercussions. You will need to provide written notice to your landlord and a copy of your orders.
Your protections under the SCRA generally begin on the first day of active duty and may extend for 30 to 180 days after release from active duty. Many of the SCRA protections are not automatic and require that you request the protection in a timely matter. For certain protections, such as the limitation on interest rates, you may also be required to prove that military service materially impacts your ability to make payments.
If you believe your rights are being or have been violated under the SCRA, please contact your local legal assistance attorney. You can find the contact information of your local legal assistance office through the MilitaryINSTALLATIONS application, under the program Legal Services/JAG or through the Armed Forces Legal Assistance Legal Services Locator application.
Anytime you are undertaking a large purchase, it pays to do your homework. There are many resources available to you. Have a mortgage question for the Consumer Financial Protection Bureau? Visit Ask CFPB. For more information about making a PCS move, and to find out about scams targeted at moving families, check out these podcasts: Preparing to PCS, Foreclosure Rescue Scams and Foreclosure Rescue Scams; Red Flags and Real Help.