Robert Mitchell provided this useful information 8 years ago:

Calculating Your LQA or OHA When Purchasing a Home

I am often asked exactly how to calculate ones housing allowance when purchasing a home overseas. Generally along with this question comes the misunderstandings that that they have been told by others. Some have said that your Living Quarters Allowance is based off how much your actual mortgage is. Others have said it is based solely on what your allowance is for your pay grade. Hopefully here in this article I can explain how your allowances are calculated in order to filter out these rumors.

Keep in mind that the base of these calculations is the same for both Active Duty Military and Civilian Employees. The difference between the two is that the Military members OHA is left in the foreign currency and converted for each pay period based on that periods exchange rate and the Civilian’s LQA is converted back to US Dollars at the time of the purchase. What this means is that the military member’s USD payment will fluctuate with the currency exchange while the civilians USD payment will be fixed on their exchange rate at the time of purchase. So a military member will always get paid just the right amount to cover their calculation each month while some months a civilian may make extra money while other months they may be short. Historically this has balanced out to where the civilian does not notice these ups and down through their course of ownership.


Example 1

Active Duty E-7 with dependents.
Purchase Price: 240,000€
Maximum OHA: 1400€ month
Utility allowance: 703€ month

At the time of this writing the maximum allowance for an E-7 in the Kaiserslautern area of Germany is 1400€ per month for housing plus an automatic payment of 703€ per month for utilities. When he buys a home for 240,000€ the military will pay his mortgage via his OHA for 10 years. The easiest way to calculate this is to know that there are 120 months in 10 years. With that being said you can simply divide the purchase price of 240,000€ by 120.

240,000€ / 120 = 2000€

This member would be allowed to take 2000€ per month for the purchase of his home. Since his allowance is 1400€ he will be maxing out his allowance and take 1400€ per month for 10 years. As he progresses in rank his monthly OHA can increase up to the calculate maximum of 2000€ per month.

In addition to this 1400€ per month the member will automatically take the 703€ per month utility allowance.


Example 2

Active Duty O-4 with dependents
Purchase Price: 165,000€
Maximum OHA: 1670€ month
Utility Allowance. 703€ month

165,000€ / 120 = 1375€ per month

An O-4 with dependents buys a home for 165,000€. She has a cap of 1670€ per month plus 703€ for her utilities. By using the same formula as in example 1 (purchase price / 120) you will see that she will take 1375€ per month. This less than her cap of 1670€. If her goal was to maximize her OHA she would need to buy a more expensive home.


Example 3

GS 11 with 1 dependent
Purchase Price: 300,000€
Max LQA: $49,000 per year or $4,083 per month

For this example we will use a civilian that receives LQA. He is a GS-11 with 1 dependent that takes $49,000 per year. This is different than the military because his allowance is offered in USD rather than Euro. The first thing that so done is that his purchase price is converted from USD to Euro based on the date of the purchase. Let’s use a conversion of .732 for this example.

300,000€ / .732 = $409,836

Once we have the dollar figure for this purchase we are able to calculate the monthly allowance given in just the same manner as for military just in USD.

$409,836 / 120 = $3415 per month

This leaves him with $668 per month remaining in his LQA to cover utilities.


Summary:

These calculations have nothing whatsoever to do with the financing amount of your home or the monthly loan payment. You could pay cash for your home and you would still receive this allowance based on these calculations.

There are many other aspects to be discussed regarding the OHA/LQA regulations and what costs can be included. This article is meant simply to show the basis on which these calculations are made.

With any questions or for more details please send an email to info@mitchell-investment.de. We look forward to hearing from you!



This article can also be found on our webisite's news feed Mitchell Consulting LQA/OHA Information



5 years, 11 months ago

That's a hard way to make a living. I rather take it to the casino.

5 years, 11 months ago

Quote by Bergman:
That's a hard way to make a living. I rather take it to the casino.


I would rather take it to the casino, too. But, I think this is a sure thing. The Euro will normalize.

5 years, 11 months ago

Quote by kyhoods:
That's what I thought just wanted to confirm. Still a great deal even if LQA only covers most of the mortgage payment. And hey, maybe the euro will only get weaker from this point on (fingers crossed)


Check this out. I won't vouch for the info, but this is usually a reliable source.

http://www.marketwatch.com/story/how-low-can-it-go-goldman-sees-euro-dollar-parity-in-september-2015-03-13

5 years, 11 months ago

As you know, nobody can tell the future...but the prediction is that it won't bounce back for a while and even get to .80 in 2017. Not sure playing the exchange rate is a good way to invest.

5 years, 11 months ago

Quote by Bergman:
As you know, nobody can tell the future...but the prediction is that it won't bounce back for a while and even get to .80 in 2017. Not sure playing the exchange rate is a good way to invest.


I agree 100%. Definitely not a good way to invest. This is gambling, and nothing else.

But, I have seen people spend money on much stupider things. I don't anticipate making a crap load of money, and I don't anticipate losing a crap load of money. Even if I were to lose 100%, which is not even possible, it would not change my style of living, one bit.

5 years, 10 months ago

Does anyone know what exchange rate the Army LQA cell uses to calculate the LQA rate for a civilian POQ rate?

I have been using this site for my TQSA travel vouchers, etc:
http://www.eur.army.mil/21tsc/266fmc/ExchangeRateHistory/

However the exchange rate on the date of my purchase contract from this site doesn't match the exchange rate the LQA cell is using.

So I guess my first question is do they use the official rate or the individual rate, which I'm guessing is the DoD rate?

Any help is much appreciated.

Quote by kyhoods:
Does anyone know what exchange rate the Army LQA cell uses to calculate the LQA rate for a civilian POQ rate?

I have been using this site for my TQSA travel vouchers, etc:
http://www.eur.army.mil/21tsc/266fmc/ExchangeRateHistory/

However the exchange rate on the date of my purchase contract from this site doesn't match the exchange rate the LQA cell is using.

So I guess my first question is do they use the official rate or the individual rate, which I'm guessing is the DoD rate?

Any help is much appreciated.


OK so the US Army CHRA LQA cell just provided it to me:



They use this site to calculate your LQA rate for your POQ purchase:
http://www.oanda.com/currency/converter/



They will use the average rate from this website for the day you sign your contract, these rates are different than the official rate that I see on the Army's website.



Adds up to about a $100 less payment for me over 10 years than if they had used the DoD rate.



I've asked for the regulation or whatever that tells them to use the exchange rate average from the oanda website

5 years, 10 months ago

Quote by kyhoods:
Does anyone know what exchange rate the Army LQA cell uses to calculate the LQA rate for a civilian POQ rate?

I have been using this site for my TQSA travel vouchers, etc:
http://www.eur.army.mil/21tsc/266fmc/ExchangeRateHistory/

However the exchange rate on the date of my purchase contract from this site doesn't match the exchange rate the LQA cell is using.

So I guess my first question is do they use the official rate or the individual rate, which I'm guessing is the DoD rate?

Any help is much appreciated.



OK so the US Army CHRA LQA cell just provided it to me:



They use this site to calculate your LQA rate for your POQ purchase:
http://www.oanda.com/currency/converter/



They will use the average rate from this website for the day you sign your contract, these rates are different than the official rate that I see on the Army's website.



Adds up to about a $100 less payment for me over 10 years than if they had used the DoD rate.



I've asked for the regulation or whatever that tells them to use the exchange rate average from the oanda website


I had the exact same thing happen. I don't think that the answer was in the regulation, but at least they are using the same website for everyone.

Here's part of the email traffic:

"The official guidance is that it has been a long-standing practice by the Civilian Personnel Operations Center, LQA Branch to use the OANDA website for conversion exchange rates. We find that this website is the most reliable source of determining the most appropriate exchange rate of the day to be used."

5 years, 10 months ago

Quote by Bergman:
I had the exact same thing happen. I don't think that the answer was in the regulation, but at least they are using the same website for everyone.

Here's part of the email traffic:

"The official guidance is that it has been a long-standing practice by the Civilian Personnel Operations Center, LQA Branch to use the OANDA website for conversion exchange rates. We find that this website is the most reliable source of determining the most appropriate exchange rate of the day to be used."



Thanks Bergman, It definitely works to their advantage to use the OANDA website vs. using what the Army calls the "Official" Exchange rate. Liek you said at leas they are being consistent, so doesn't sound like I'm gonna win this battle. It's just funny that they used the rates from the Army website to pay my TQSA.

5 years, 10 months ago

Quote by kyhoods:
Thanks Bergman, It definitely works to their advantage to use the OANDA website vs. using what the Army calls the "Official" Exchange rate. Liek you said at leas they are being consistent, so doesn't sound like I'm gonna win this battle. It's just funny that they used the rates from the Army website to pay my TQSA.


Exactly, I decided it was not worth it to push back. They also use that site for payback TDY costs...but not per diem or TQSA.

5 years, 10 months ago

This is why using DoD financial institutions to get your Euro is a bad deal. The rate you get for Euro purchases is higher. When you get reimbursed, you end up losing money. Getting your Euro off base always works out better.

5 years, 10 months ago

Quote by JOFTAA:
This is why using DoD financial institutions to get your Euro is a bad deal. The rate you get for Euro purchases is higher. When you get reimbursed, you end up losing money. Getting your Euro off base always works out better.


This is sort of unrelated, but not the reason. The reason why is DoD banks on post are getting a commission and give part of the profits back to the DoD for being on post. The website used for LQA and TDY costs are mandated by the 226th.

5 years, 10 months ago

I wish they would convert my purchase price to dollars using the on base rate, then my mortgage payment allotment would be much higher in dollars.

I just looked at the exchange rate for my ITS Pay allotment to my Local German Bank on 02 April (my first one), they used .9313, OANDA rate for that day was .9291, The 266th Finance Group official rate for the day was .9264 and the individual rate was .9032. Shows how different they all are, but hey when you are getting paid it shows the ITS gives the best rate. Definitely a good plan to do direct deposit direct into German Bank Account.

5 years, 10 months ago

Then on xe.com there's a whole different rate. Not sure which is truly the closest to reality.

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