Need a Home Office? Here's the Best Way to Finance It

An efficient office setup could make remote work more productive and bearable. Here's how to pay for it.

A lot of people have been working remotely since the start of the coronavirus pandemic, and many large companies have already stated that they won't be bringing employees back to an office until well into 2021. If you have no plans to return to your former setup anytime soon, then it could be time to invest in a better at-home workspace -- one that allows you to do your job comfortably and efficiently.

If you're lucky, your employer may be willing to kick in some money to help in that regard, but most likely, the cost of that office configuration will be on you. And if so, you may be wondering how to pay for what could be a sizable expense when you factor in equipment like a desk, chair, monitor, printer, and, in some cases, a wall or screen for privacy. Here are some options to consider if your home office will end up being a substantial investment you don't have the cash for on hand.

1. Take out a personal loan

If you don't own a home, or don't have equity in one, then borrowing against your property won't be possible. But if that's the case, a personal loan could be a good solution. With a personal loan, you can borrow money for any purpose, and the interest rate you'll pay on your loan will typically be much lower than what you'll pay on a credit card balance. Of course, the stronger your credit score, the greater your chances of scoring a low interest rate on a personal loan, but you may have options even if your credit isn't great.

2. Borrow against your home

Just as a personal loan lets you borrow money for any purpose, so too will a home equity loan or home equity line of credit (HELOC), so if you own property you have equity in, either option is worth considering for financing an office. With a home equity loan, you borrow a specific sum and pay it off over time at a fixed interest rate, like a personal loan. With a HELOC, you get access to a line of credit you can draw from as needed. Your interest rate, however, could change over the course of your repayment period. Either way, you'll most likely pay less interest with a home equity loan or line of credit than you will with a personal loan.

3. Do a cash-out refinance

With a cash-out refinance, you swap your existing mortgage for a new one that's higher than your remaining mortgage balance, but that comes with a lower interest rate. You can then use the remaining cash for whatever purpose you please.

The upside of doing a cash-out refinance is that interest rates are very low right now, so it's an affordable way to borrow. But unless you're taking out cash for other purposes, you probably don't want to do a cash-out refinance solely to build yourself an office (unless that project is thousands of dollars in the making). You'll pay closing costs any time you refinance a mortgage, and those costs could be substantial, totaling 2% to 5% of your loan amount. If you need $800 for a home office, a cash-out refinance won't make sense, but if you have other renovations on your list and need $10,000 to cover them all, your office included, then a cash-out refinance could be a good solution.

The right setup is crucial

Many people who are currently working from home might easily end up doing so for another year. Some might even end up working from home permanently. If you don't have a decent office setup, now could be the time to invest in one. And thankfully, you have several good options to choose from if you don't have the money immediately available to spend.