If after months of working from home you’ve reached a point where the kitchen table just isn’t cutting it, you’re not alone. A growing number of homeowners are remodeling and investing in their own workspaces. In fact, PowerPay, a home improvement lending platform, observed a 92 percent jump in home office renovations among its borrowers in the latter half of 2020.
“We’ve seen a massive move to invest in the home/work environment,” says Mike Petrakis, founder and CEO of PowerPay.
If you’re like many considering building a formal home office to stay on the job or boost productivity, you have several options to pay for it.
8 ways to pay for your home office setup
1. Your employer
If you’re working for someone else, your employer should be the first source you look to for assistance getting your home office up and running.
“Especially now with COVID-19, most employers are reimbursing employees for working from home for personal expenses,” says Mark LaSpisa, certified financial planner and managing advisor of Vermillion Financial Advisors in South Barrington, Illinois. “They’re furnishing everything from computers and monitors to desks, chairs, internet service and utilities.”
2. Cash-out refinance
If you’re looking to do an extensive home office remodel or addition, refinancing your mortgage and taking cash out is one way to access the money to pay for it.
In a cash-out refinance, you take out a new mortgage for a higher amount than you owe on your current one and pocket the cash in a lump sum, minus closing costs, which generally amount to 2 percent to 5 percent of what you’re borrowing. The interest rate in a cash-out deal is often a cheaper option than a credit card, and most mortgage lenders will allow you to tap up to 80 percent of your home’s value.
3. Home equity
“Most people don’t refinance a $200,000 loan to get $5,000 out — most times they’d go get a home equity line of credit,” La Spisa says, noting that if you get a HELOC, you only need to repay the portion of it that you use, and you don’t have to use the entire line of credit.
HELOCs have variable interest rates, but since you’re using your home as collateral, the rate is usually lower than what you’d pay with a credit card or other form of unsecured debt. Home equity loans have fixed rates, and whatever interest you do pay is tax-deductible if you use the money for home improvements.
4. Personal loan
While accessing your home’s equity can be a less expensive borrowing option for financing a home office, a personal loan can also be a good fit depending on your goals. If adding a home office would be a small- to mid-sized project for you, for example, you can borrow a smaller amount of money with a personal loan.
One key benefit of a personal loan is that you’re not using your home as collateral to secure the loan. Even though personal loan rates can run high — as much as 36 percent annually for those with less-than-favorable credit — you might be able to get one for as little as 3 percent if your credit score is excellent.
5. Credit cards
Cards are also a good option when it comes to purchasing office supplies or financing electronics like a laptop, printer or tablet. Some cards offer up to 5 percent cash back on electronics purchases, and others allow you to accumulate rewards points that can go toward others.
Credit cards come with higher interest rates than other kinds of borrowing, however, so be cautious using them. You could end up paying a lot in interest if you can’t pay the balance off in full each month.
6. SBA loan
If you own your own business or are self-employed, a loan from the U.S. Small Business Administration (SBA) can help you obtain the funding you need for various for-profit business expenses, including a home office.
“If you’re just starting a business or are in business already, the SBA has all kinds of programs they can assist you with as far as capital to start a business,” LaSpisa says.
On a large scale, a loan through the SBA’s 7(a) program offers up to $5 million for eligible small businesses for uses like an expansion, renovation or new construction. For a smaller project, the SBA Microloan program can provide up to $50,000 for expenses such as office furniture and supplies.
7. Tax deductions
While not an outright way to pay for a home office, the home office tax deduction can help you recoup a chunk of your expenses if you qualify. The deduction applies only to those who are self-employed (the use of the deduction has been suspended for employees through 2025), and is available to both homeowners and renters.
To be eligible, the IRS requires that your home is your principal place of business, and that you regularly use part of your home — either a dedicated room or a section of a room — exclusively for conducting business.
8. Repurpose an existing space
A home office doesn’t need to cost much, if anything, if you repurpose an existing space in your home and reuse furnishings you already have.
Interior designer Penny Francis, owner and principal designer of Eclectic Home in New Orleans, has seen an attic transformed into a “Zoom room” complete with a set backdrop, and also a cleared-out closet as a designated workspace.
If you decide to repurpose a room, Francis recommends repainting it to get the most bang for your buck, and then focusing on functional pieces like a desk and a good desk lamp for task lighting.
“On the organizational side, little things like storage bins from a discount store can make a huge difference,” Francis says.
A detached structure, like a garage or storage shed, are also fair game for repurposing. You can upgrade a structure using many of the same financing options — including a home equity loan and a personal loan — as you would for an indoor renovation.