In the post-pandemic world, working from home has been normalized, and often the necessity has shifted to working from home by choice, resulting in much-needed office space. The temporary improvisations on the dining table or kitchen counter are not long-term sustainable, and a dedicated space goes a long way in your comfort and productivity.

Often, we are limited in square feet and budget. To make it work, leverage your homeownership to design, make changes as needed, and fund the possible costs, keeping in mind the impact on the home’s value.

1. Your home design, think out of the box

Location is everything. Do you need to be isolated if needed, to work with no distractions and no interceptions when you are on video calls? Do you have a space that can provide you privacy, with a preference for natural light? Rethink your space, and you will enjoy it in the years to come. You can adapt an existing space by reassigning its purpose. Do not shutter the thoughts due to work needed; think about the best use of your home space, and later you will analyze if the numbers support your ideas. For example, if you have a nice size laundry room on the main floor with a door for privacy and a window for natural light, check what it entails to relocate the washer and dryer to the basement, freeing up the area for your home office. You might prefer to do the laundry on the main floor, but you can enjoy the space and natural light more significantly during your full work days. Same. Do you have a screen porch you can enclose or other solutions to provide you the long-term comfort. Think out of the box, and ensure it makes financial sense.

2. Does it make financial sense?

How do you know if your idea makes financial sense? Some solutions require minimum effort by moving furniture around, and some targeted changes, such as additional light, outlets, and paint. Let’s rethink if you need to make significant changes, finish part of the basement or attic, or isolate the family room by building walls or french doors. Maybe your solution is building an addition or enclosing a screen porch. Ask yourself the following questions:

• Is it necessary? Is this the only solution, or do you have other options?
• Will the change depreciate the home’s value by creating a less desired space when you sell the home? If you cancel a walking closet or enclose a family room, will it be less appealing to the future buyer?
• If you spend money on finishing an area, will it appreciate the value of your home? A finished basement will not appreciate the value of your home as finishing an attic or enclosing a screen porch. The home increases its value the most if you add finished square feet from the entry level and up.

You cannot think short term, benefit from some change, and find yourself in a challenging position when selling your home. Other renovations might seem on a larger scale, but do they make sense financially to be able to afford the renovation, and long term, to ensure you do not overpay and lose money.

3. Finances

Your homeownership entails significant financial opportunities. Let’s review a few aspects you should be aware of and implement if relevant and convenient.

• How much is your home’s current market value, and what is your Loan-to-Value (LTV)?

Your home’s value will provide information to indicate further potential opportunities and savings. You can consult your realtor or find estimated values on websites such as Zillow.com, Realtor.com, and others. Those websites can have a range of errors, but usually, it gives you a good idea. After knowing your home value, calculate your LTV. You divide the percentage of your home’s debt by your home’s value.  For example, if the total liens on your home (mortgage, Home Equity Line of Credit, etc.) are $180,000 and your home value is $280,000, your LTV is 64%.

• If your LTV is under 80%;
• Are you making unnecessary payments to your lender?

If you have a conventional loan and are paying mortgage insurance, when your LTV is under 80% (some lenders calculate 78%), you should stop making the mortgage insurance payments. When you purchased your home, the lender calculated your down payment as a percentage of the purchase value.  As you pay down your debt, the lender will compare your debt to the home’s original value to determine your Loan-to-Value (LTV), regardless of your home’s current value. If your home has appreciated significantly in the last few years, and your LTV is under 80%, call your lender, and based on a new appraisal, this payment can be dropped off.

• Can you benefit from a cash-out refinance?

Most Lenders will allow cash-out refinance up to 80% LTV, pending mortgage qualifications. If you need money to renovate the home for your home office, check if it is convenient for you to refinance, often considering other benefits such as debt consolidation, length of the loan, and more.

• Do you take advantage of the tax benefits of working from home?

There are tax benefits from using a home office, allowing you to deduct certain home expenses. Consult your accountant. 

4. A piece of work to get peace of mind

Putting together all the pieces of the puzzle, configuring the tasks needed, working on the finances, and, of course, the inconvenience when you are in the middle of renovations is a challenging task.  On the other hand, your home work environment significantly impacts your comfort, productivity, and peace of mind. Think long-term, as it is not an occasional task; it can benefit you daily.  Plan, design, address the work and financial needs and enjoy your creation.