Working from home is a common dream for many people. Eliminating a lengthy commute and a boss peering over your shoulder can make many workers more productive and satisfied with their working environment. Telecommuting has become far more common, and many new entrepreneurs are thriving by running their own businesses. Ecommerce solutions and constant connectivity have made it easier than ever to work from home. Yet there are financial implications that must be considered before you take the plunge, affecting insurance, taxation, and housing.
Whether you’re thinking about taking out a new mortgage or remortgaging your existing one, you’ll need to think about these issues. In most cases, those who telecommute from home one or two days a week or who run a business website in their spare time won’t need to worry about this. Yet when you work primarily from home, it can change how your residence is classified. The Council of Mortgage Lenders recommends that you let your mortgage company or landlord know when you are working from home.
The reason why lenders may be interested if the property is going to be used for business or not is because this will help distinguish whether it needs to be classified as residential or commercial. In most cases, if you are working from a home office, the mortgage would still be classified as residential. Generally, if over 40% of the property is used for commercial purposes, it would garner a corresponding commercial mortgage rate. This would be the case for those who run a consulting practice or workout studio out of the bottom floor of their house, for example. Another option is to move into a live/work unit. These also have different mortgage rates to consider, and may be more difficult to find financing for.
Home and Contents Insurance
Working from home could also have an impact on your home insurance rates. Some insurance companies will view home workers as higher risk, because they might have more expensive equipment kept at home. This will depend on the type of business you run. A small ecommerce company can be run from your home laptop, for example, which wouldn’t make your property any more of a liability. Yet if you are running a printing business that also offers web design services, you might have expensive design and printing equipment on the premises that could raise your insurance rates. Businesses that involve customers visiting the home may also need to purchase public liability coverage in case of accident and injury lawsuits.
On the other hand, some insurance companies will see home workers as presenting less risk, because the house is less likely to be broken into if there’s someone there all day. It’s best to compare and contrast all of your mortgage and insurance options as a home worker before you sign any contracts. Different lenders and insurance companies will see telecommuting in different ways, which could potentially work out to your advantage.