BAH, or Basic Allowance for Housing, is an allotment of money offered by all military branches to active duty members to cover housing costs for those who do not reside in government housing or barracks. Administered by the Defense Travel Management Office, BAH pay rate will vary on several factors. Still, the amount is calculated to cover 95% of housing expenses with the service member paying only 5% out of pocket. (source)
How much does BAH pay?
A powerful military benefit, the BAH payment rate is directly related to the cost of rental housing in local markets. It is designed to cover expenses if you live in privatized housing and thus changes based on the rental costs found at your duty station.
Your pay grade and the number of dependents are also taken into account. If you are stationed in a more expensive area, the amount offered will be higher to allow for this increase. And while the rate itself changes each year, service members are not adversely affected by these changes.
When BAH rates go up, it is generally observable, while the opposite is not. When rates drop, individual rate protection is in place to ensure that your own BAH doesn’t decrease if your situation remains the same.
Ways to see a decrease in your BAH
It isn’t often that you’ll see a decrease in your BAH pay. More often than not, the allowance is increased for the cost of living adjustments. But, there are some cases where a service member will see their BAH decrease. These scenarios include:
- Change of location. If you are PCSed to an area with a lower rental housing cost market, your BAH will be adjusted to reflect that change. The decreased amount will go into effect from your report date at your new station.
- You get demoted. If you are demoted, the BAH rate calculator will reflect that change of rank in allotted funds. If you are demoted to a level with a lower rate, this is your new rate. However, if you are promoted to rank with a lower BAH payment, you will not be penalized but will receive the BAH of your previous rank. Generally, those service members with higher ranks and more years of service get more BAH money, but there are some exceptions to this rule.
- Dependency status. Your amount of BAH is also calculated with your dependents in mind. Supposedly a change of circumstances creates a change in status from “with dependents” to “without dependents,” which will be reflected in the BAH amount. The reduced rate becomes effective at the date of the dependency status change. On the other hand, there is no increase of BAH money for a service person with a spouse and children compared to one with a spouse only.
Basic allowance for housing rates in 2021
As reported by the Department of Defense release, the BAH rates for 2021 went into effect on January 1, 2021. These new rates reflect an increased rate of 2.9% across the board, although some may not see the increase due to cost of living factors in certain areas. You may calculate your personal BAH amount by using the Basic Allowance for Housing calculator available here.
Using your BAH to qualify for a VA loan
Basic Allowance for Housing continues to be one of the most useful benefits the military offers to its service members. Covering one of the largest expenses for any worker (housing), BAH allows those in the military to save money toward eventual homeownership. And extra money flowing into the budget isn’t the only advantage.
In addition to saving a bulk of the money that is usually paid for housing rental, the Basic Allowance for Housing is also a powerful benefit in that it can be used to pay toward a mortgage. Mortgage lenders consider BAH as income for those service members who wish to invest in a home purchase.
Also eligible for VA home loans, service members can take advantage of both of these powerful financial boosters to help buy their first home. Homeownership is the first step to building wealth for most Americans, and BAH income can make this dream possible for military service members.
Contact us today to learn more!
If you are a service member who is ready to take that next step to homeownership, reach out to the team members at Hero Home Programs™. They will help you find area experts who can assist you with your home buying adventure while saving you thousands of dollars. They also have access to local grants and tax rebates, stretching your dollar even further. They work tirelessly to find a military home loan lender that will use your BHA to your advantage while keeping as much money as possible in your pocket. Request a consultation with our experts today!