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Home Ownership and Permanent Change of Station (PCS)

military PCS

Members of the armed forces learn very early in their careers that being flexible is an important skill. When orders are handed down, they will be expected to cooperate and make adjustments quickly. One of the major adjustments that this group faces is called PCS or permanent change of station. Essentially, this is a relocation, and for those who own a home there can be quite a few complications. Today, we’re going to talk about some of these complications along with solutions and tips that can make these change easier to handle. The second installment of the Hope Now military podcast is also included below.

Major Issues

The main issue with home ownership and PCS is something like this: You own a home and are forced to move somewhere new, where you must decide to rent, own or (if available) live in the barracks. This is complicated further by the following considerations:

  • How much equity do you have in the home?
  • How did you time the market when you purchased (can you sell the home for close to what you paid for it)?
  • How quickly can you sell the home?
  • If you rented the home, would rent cover your mortgage payment?
  • Do you have a family, and are they moving with you or staying in the home?

We certainly can’t talk through every single possibility here, but we can give some broad advice that will apply to most of these situations.

Moving when You have a Family

As discussed in the podcast, moving without your family can be much more complicated and expensive. If you rent or own in the new location, you will essentially be running two households, which can be quite costly. Your best two options are typically to either move the family to the new location or request to live in the barracks, qualifying as a geographic bachelor.

Selling or Renting Your Old Home

You will more than likely want to sell your old home, but based on a variety of factors this may not be easy and could take several months. You should consider renting the home in the short-term to provide income while the house sells. One of the interviewees in the podcast even recommends that you refinance the home first, before renting.

That might be good advice in some cases, but not if you have to pay a lot of closing costs on the refinance. The better advice (also given in the interview) is to work with a local realtor to run comps in your area. These comps will not only help determine your listing price, but they will also help give you realistic expectations of how long it will take to sell the house.

Another point about renting is that if you move away, you won’t be able to be the active landlord. You would likely need to hire a property manger, which could leave you with very little “profit” on the rent payments coming in. Depending on your particular financial situation, this could still offer you a good return.

Buying High and Selling Low

One question from a listener in the podcasts explains a situation where a family bought a house at the peak of the market and now needs to sell, at a time when the market is down. This is a reminder of the tough situations that servicemen and women are put in, because they could not really “choose” when they purchased the home.

In these situations, depending on severity, people can look into the HAMP or HARP programs, although they are designed for struggling homeowners and may not be easy to qualify for.

Another point to consider is that the family in this case has been in the home for seven years before receiving PCS orders. In other words, they have had quite a while to develop a backup plan. In these situations, it’s crucial to establish emergency savings and equity in the home. One point not mentioned in the podcast is that 15-year mortgages could be useful for members of the military. Of course, when you opt for this shorter mortgage, the payment is more expensive, so you would need to get a cheaper (often smaller house). However, the structure of the loan allows the homeowner to build equity much more quickly, which would prove to be extremely helpful if they needed to move within a few years’ time.

Complications with Renting

The final listener question points out that by having a home that’s not owner-occupied they were subject to higher interest rates on the loan. This makes sense, because the bank is taking on more risk in these cases. The couple in this case also missed out on some refinance opportunities as they were holding out for lower interest rates.

Between that and the fact that homeowners will likely need to pay for some form of property management, renting while on PCS might not be a generally good solution. Again, it can be helpful to work with a realtor to help identify how much the property is worth in rent, and you might also consider contacting a financial professional such as those available via the Armed Forces Community Service or a nonprofit credit counseling agency to ensure that your financial plan is sound.

Should You Buy at All?

Serving in the military is often synonymous with moving multiple times. When you know that you will face this uncertainty, you might avoid buying altogether. One of the podcast speakers didn’t buy a home until retirement, and he seems pretty happy with that decision.

If you do buy, you need to rely on a multitude of factors, some of which are in your control and some which are not (like the timing of the market). You also need to have an established emergency savings and need to do your due diligence. There are other complications to consider, too, like the potential loss of your spouse’s income when you move, changes to Basic Allowance for Housing (BAH), and others. Long story short, it’s a serious decision that needs to be planned thoroughly.

Go ahead and take a listen to the podcast that covers the topic in more detail and features two servicemen who share their experiences:

We hope this information has been helpful to you. If you’d like more financial counseling resources geared toward members of the military, be sure to check out our Reconnect program.

Thomas Bright is a longstanding Clearpoint blogger and student loan repayment aficionado who hopes that his writing can simplify complex subjects. When he’s not writing, you’ll find him hiking, running or reading philosophy. You can follow him on Twitter.

This post was first published by Clearpoint. To speak with a Clearpoint Credit Counselor, call 888.808.7285 or learn more about their Military Reconnect Program.

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