Guide To Prepping For A PCS
So, you got Permanent Change of Station (PCS) orders. You’re not alone. Nearly 700,000 service members get transferred to new assignments each and every year.
The name may seem ironic. “Permanent Change of Station” doesn’t always mean “permanent” now does it? But when you do get your very own PCS, there are some things you can do in advance to not only make the move go smoother but save you money at the same time.
Prepping for your PCS
Determine which costs are reimbursable
Since the military is moving you and your family, the PCS is almost free of charge. Almost. Yes, the military will cover your move but there are some costs you may encounter and it’s better to prepare for them in case they pop up on your financial radar. On average, a service member can expect to pay nearly $2,000 in fees for non-reimbursable expenses.
To find out what is considered a reimbursable expense or what the military will pay for, find out in advance by contacting the family center. The military will hire a commercial mover to pack up your household goods and move them to your new station at no charge to you.
- Consider costs associated with temporary housing, including hotel stays and food during your transfer to your new location. Since PCS is a summer event, many take advantage of the timing and take personal leave for a family vacation. Obviously, the military won’t pay for your trips to Disneyland but you can expect a per diem allowance for food and travel. Again, if you’re not sure what the military will reimburse and not reimburse, contact your family center for details. Don’t guess, find out for sure.
- When you move and set up housing, remember you’ll have to have utilities, phone and cable set up in your name. These often require cash deposits and can vary. Expect a $100 deposit for each service just to be safe.
- When packing, donate the things you don’t use any longer to a local charity but don’t forget that some items will need to be replaced once you arrive at your new destination. Budget for replacement items you’ll need as soon as you land.
- Keep track of all non-reimbursable expenses you incurred and keep receipts for everything. You never know when you might need a receipt to get reimbursed.
- If you want to use your VA home loan benefit to buy a home in your new destination, chat with a VA loan specialist to make sure you meet all the guidelines.
Call your insurance agent
Your commercial mover has an insurance policy to cover items moved in transit. However, there are limits to what some movers’ insurance covers. If you hire your own carrier and do your PCS yourself, make sure you fully understand what the carrier covers and what the carrier does not. Commercial carriers are required to maintain a minimum level of liability insurance for damage to your goods but some carriers have better policies than others.
- Call your insurance agent to see what coverage you may have for damaged goods beyond a carrier’s limit. If your current policy doesn’t have a rider for transported property, you can purchase temporary coverage from your agent.
- If you’re shipping your car, make it clear that your vehicle will be covered in case of transport damage caused by the move. Most policies that offer such coverage require no out-of-pocket deductible from you.
Do it Yourself PCS
While the military will cover 100 percent of the government’s contracted commercial mover, you also have the choice of moving yourself. If you decide to move yourself and choose your own carrier, the government will reimburse you up to 95 percent of the government’s estimated cost to move you.
- For example, if your PCS takes you from California to Florida, the government has a set rate paid to a relocation company assigned to move you, your family and your belongings. Say that rate is $8,000. If you choose your own carrier and pack and move on your own, the government will reimburse you 95 percent of $8,000, or $7,600. That means you can shop around for your best moving package and even come out ahead on the deal if you can make your move for even less than the 95 percent allowance.
- Your estimated moving cost will vary based upon pay grade and the number of dependents in your family so find out exactly what your reimbursable amount will be. It may be worth it for the Transportation Management Office, or TMO, to take care of everything for you. Regardless, run the numbers either way.
Moving is a part of military life and while it’s may not be your favorite thing to do, don’t let moves affect you financially. If this is your first PCS, it can be exciting and challenging at the same time. Take advantage of base resources, plan ahead and most of all: remember what you’ll do differently the next time you receive your PCS.
What to do with your home
Let’s say that you decided to go ahead and finally take advantage of your VA home loan benefit and bought your first home. You found a VA lender, obtained your approval and moved in, all with no money down. Sometimes though, you find yourself suddenly leaving the area for a deployment, PCS, or other relocation. What do you do with your current home?
There are choices and each has its own unique advantages but you need to be aware of all your options before you decide.
- Keep the property and rent it out
- Sell the property using an assumption
- Sell the property outright while restoring your entitlement in the process
- Keep the home with no other action.
Here’s what you need to know about each option.
Option #1: Keep your home and rent it
This is the preferable option for those who are leaving the area and will return. You retain ownership in the home while taking rent payments each month to help pay your mortgage, insurance and property taxes.
In many parts of the country, rental rates are much higher than mortgage payments, especially if you bought or refinanced your VA loan within the past two years. Often, you can start breaking even or maybe turn a profit each month by having a renter live in your home.
This is the best of both worlds because you keep your house and someone else pays the mortgage for you in the form of rental income.
This also means you’re going to be a landlord. If you are some distance from the home, you may not be able to fix a hot water heater, or collect the rent is late for that matter. To address such concerns, consider hiring a property manager while you’re away. Not only can a property manager help screen tenants for you but can collect rent, maintain your home and provide you with considerable peace of mind while you’re gone.
Keep in mind, however, that hiring the property manager will eat into your rental income, and may even make renting out the home unfeasible.
Option #2: Sell with an assumption
VA home loans have a feature called “assumability.” This means your existing home loan and all its terms may be assumed by a third party. In other words, someone else takes your mortgage and payments. This is a great option if you have an interest rate on your mortgage that is below current market rates. That’s a bid incentive for someone wanting to assume your loan.
But, VA loans are what is called “qualified” assumable. This means the buyer must qualify based upon income and credit.
A VA loan can be assumed by most qualified buyers, including those without VA entitlement. There are fewer closing costs associated with an assumption but the buyer may pay the VA lender an assumption fee along with a funding fee of 0.50 percent, which may be included with the loan amount.
An assumption must be coordinated with the VA as well as the current VA lender.
However, when your VA loan is assumed, while your obligation to pay the mortgage is released, you do not regain your entitlement until your buyer sells the home or refinances the mortgage out of the original VA home loan.
This could be a big drawback because your ability to purchase another home with a VA loan is reliant on what the buyer of your former home chooses to do.
Option #3: Sell outright
When you sell your home outright with no assumption, your existing VA loan is retired with the loan proceeds and your entitlement restored, allowing you to use your VA zero down loan benefit again in the future.
The selling process can take time and if you’re deployed or otherwise move soon, your home may be listed for sale long after you’ve left. Be prepared to have a power of attorney established with a relative who can sign closing papers on your behalf or contact a real estate attorney who can facilitate a closing for you.
Selling a home does have additional closing costs associated with it. The biggest such cost can be real estate commissions, usually equaling 6% of the home’s sale price. That’s $12,000 on a $200,000 sale. There are also settlement services, title insurance, and another big one: excise tax, or the tax the local jurisdiction charges every time a home is sold. The buyer also may request repairs or help with closing costs. The total cost to sell the home could be quite substantial.
These closing costs can be paid with the proceeds of the sale but you’ll need equity in your property to do so. Sometimes a home will be “underwater” where the sales price is not enough to cover the closing costs and the outstanding mortgage. In such an instance, you will have to come to the closing table with money to settle the account.
Option #4: Keep the home without renting it
You may opt to simply keep the home. You can leave the home vacant and decide what you want to do with it. Maybe you’re in a nice coastal area and you can see the home being your retirement home one day. Or you can simply decide to keep it as a second home, and vacation there.
Of course, these options require substantial income, since you’ll be supporting two housing payments: the property you own, and the property you rent or own where you’ll be moving. Many times, the ongoing monthly expense eliminates the option of keeping the home.
FAQ: Deployment and Home Ownership
Are there any resources available that can help while I’m deployed?
Yes, each service has an entire department dedicated to assisting active-duty personnel to adjust during a deployment providing a variety of free services to active duty personnel and their families.
If I decide to rent out my home, how do I qualify potential tenants?
Basic qualification comes from reviewing a prospective tenant’s credit report, verifying their employment, and getting references from friends, family and previous landlord. For a fee, you can also employ a property management firm.
Is there help if I’m behind on my payments?
Sometimes relocating goes hand in hand with financial hardship. If you are having trouble making your payments, review VA’s Delinquency Assistance guide.
If someone assumes my VA mortgage and they’re late, does that affect my credit?
A loan that is fully and completely assumed by a third party releases you from any further obligation on the mortgage.
How do I know how much rent to charge?
You can contact a local real estate agent, property management firm or research similar rentals in your area.
PCS allowances & resources
No matter where you’re headed due to your recent PCS orders, there are multiple PCS allowances that will help you transition from place to place.
PCS per diem
A per diem allowance is a daily amount allotted for food and shelter while you travel to your new station. Per diem amounts are based upon a flat per-mile rate. The military expects you to travel 350 miles per day. You will be reimbursed for both mileage as well as meals and hotel expenses.
Per diem amounts are distributed among family members based upon age and when added together make up your total per diem allowance
Temporary Lodging Allowance
If you haven’t used your VA home loan benefit to buy a home at your new station or you have but your home is not yet in “move-in” shape, you can take advantage of the Temporary Lodging Allowance (TLA).
The TLA is an amount that offsets some or all of your initial housing and meal expenses incurred when you first arrive. This amount pays for food and temporary lodging expenses while you wait for permanent housing either on base or off.
PCS Travel Advance allowance
A cash advance to help offset initial travel costs, meals and temporary lodging is available with the PCS Travel Advance. Up to 80 percent of eligible costs may be advanced and do not have to be repaid. You should apply for the PCS Travel Advance at least 10 days prior to departure and approved PCS Travel funds will be automatically credited to your bank account.
Basic Allowance Housing
If you don’t receive military-provided housing you can qualify for a Basic Housing Allowance (BAH). The BAH is an allowance that pays certain housing costs such as rent and other expenses. Pay rates for BAH and other allowances can vary based upon pay grade and the current average cost of rent for similar housing in the area.
Use your BAH to help with your mortgage payment.
Overseas Housing Allowance
The Overseas Housing Allowance, or OHA, is similar to the BAH allowance except you’re living overseas and covers basic rent, utilities and regular housing maintenance. Similarly, the OHA allowance is based upon pay grade and the number of dependents.
The Dislocation Allowance (DLA) is an account that covers unintended, miscellaneous costs not associated with mileage or per diem allowances and is a payment made one time during a single PCS move. As with other allowances, the available amount is based upon rank and the number of dependents the service member claims.
Monetary Allowance in Lieu of Transportation
Monetary Allowance in Lieu of Transportation (MALT) is reserved for payment offsetting the costs associated with a service member or family member driving to the new PCS and is calculated on a “per mile” basis. This is not an allowance for moving vans, lodging or meals.
House Hunting TDY
This last entry for available PCS allowances is really not a financial allowance but an allowance for the time by applying for a TDY. Service members are allowed a TDY for up to 10 days to travel to your new PCS in the search for a home. This TDY is called a “permissive” TDY because no per diem is paid for travel but you’re not docked for being away from duty while you’re house hunting.
You’re eligible for this benefit once you receive your PCS notice. The TDY “clock” starts ticking once you arrive at your PCS where you have 10 days to find housing and not be charged with off time. You don’t quality for TDY if you intend to live in the barracks on base.
If you’re going to use your VA home loan benefit and buy a home, get as much done at your current station as you can regarding applying for a VA loan and speaking with a VA loan officer. The more you can do in advance without taking a TDY the less personal time and expense you’ll invest.
Know before you go
The important takeaway from these various allowances is twofold. First, there are several allowances, and second, sometimes one or two of them are overlooked. When you first receive notice of your PCS, immediately make an appointment with the Travel Office who can help you navigate through all the forms and available assistance.
Start researching available allowances early as they all require specific paperwork to be reviewed, signed and documented before the allowance can be issued. Review the available allowances, check the ones that apply to you, then begin the task of completing your paperwork. Take it one step at a time and soon you’ll be at your new PCS with all the funds due to you in your bank account, or on the way.