With more people working from home thanks to the pandemic and the Great Resignation, now is a good time to make sure you’re compliant and not going to get yourself into trouble.
One often overlooked element to working from home is whether it impacts your mortgage or not.
The short answer is no, for most people working from home doing clerical work, it won’t impact your mortgage.
The longer answer is slightly more complicated.
Working from home and mortgages
The pandemic gave many of us a view of how life could be. A work life balance, more time with the dog or the kids, a more relaxed working environment and the ability to choose your own brand of tea and coffee.
It wasn’t like that for everyone of course, but for many it was a vision of a future.
If you’re planning to switch permanently to working from home, will it impact your mortgage?
Maybe.
Some mortgages have a clause in them preventing you from operating a business from your home.
That shouldn’t impact you if you’re still working for an employer, but if you’re planning to go freelance or set up on your own, it might.
The typical measure is how much of your property will be used for company business. If it’s over 40%, you may need a commercial mortgage.
Let say you turn your garage into a storage room for your business and your upper floor into offices.
In that example, you would very likely need a commercial mortgage.
Or, if you turn your ground floor into a supper club or popup restaurant.
Those would also very likely need a commercial mortgage.
If you’re just working from a laptop on the dining room table or have a desk in a spare bedroom and you don’t have business visitors, that shouldn’t need a commercial mortgage.
I would suggest checking with your mortgage provider to make sure they know what’s going on.
Most will not require a change for most home workers.
I have worked from home for over 15 years and my mortgage provider asked me the type of work I was doing, where I was doing it and said nothing needed to change.
I suspect most home workers will experience much the same.
It’s only when you’re planning to run an eBay business, popup restaurant or online store and plan to convert part of your home for the business that you’ll have to consider a different mortgage.
I suspect that’s because it’s close to change of use and an excuse to make a little more money out of you, but I could be wrong…
What happens if you don’t tell your mortgage provider you work from home?
For the average home worker, I suspect nothing will happen. At the end of the day, the mortgage company just wants their money and won’t care too much about where it comes from.
That said, it’s much better to just tell them so you’re fully covered and there are no issues down the line.
For a more professional opinion:
Claire Flynn, mortgages expert at money.co.uk, said: “If you’re running a business from the comfort of your own home, the first thing you need to do is notify your mortgage lender.
“If not, you risk breaching the terms of your contract, with some lenders prohibiting business use as part of the terms and conditions. In the worst case scenario this could result in you having to repay the whole mortgage immediately.
“However, in most cases homeowners are simply doing their regular job from home. If that’s the case, and you’re just at a computer, then it’s unlikely this will cause a problem and your lender will probably allow you to continue with your residential mortgage.
“You’re much more likely to need to make a change if a significant portion of your property is being used for business purposes. This could be the case if you sell products and have stock on the premises, or run a photography studio from your residence, among other things.”
So there you have it.
If you work from home at a computer, nothing much is likely to change.
If you use more than 40% of your home for your business, you may have to consider a commercial or semi-commercial mortgage.
