Home Improvement Finance

Best HVAC Financing Options: Buying a New HVAC System

“You need a new HVAC system.” Those six words can stop the heart of even the most experienced homeowner because a whole new HVAC system can cost anywhere from $5,000 to $10,000—or more in the United States.

HVAC stands for heating, ventilation, and air conditioning and is also known as a home comfort system. The components vary, but a typical system might include a furnace, boiler, heat pump, pipes or ductwork, air filter, or air-conditioning compressor.

Given the high cost of replacing HVAC equipment, it’s no wonder many homeowners seek out financing to help cover the cost. But with more than a few HVAC financing options to choose from, you want to make sure you pick the right one for your needs.

HVAC financing options: 4 loan types to consider

There are various types of home improvement loans that can be used when financing a new HVAC system. So, which one is best for you? Let’s take a look.

1.) Personal loan financing

“Many people use personal loans when financing home improvements of all types,” says Joe Toms, president of FreedomPlus.

They can be one of the fastest and most affordable ways to cover surprise expenses— like a new heating and cooling system. Review some of our top personal loan lenders below and determine if you qualify in minutes (without hurting your credit).

Browse and compare top personal loan lenders 

Personal loan highlights:

  • Interest rates vary depending on your credit, and some lenders offer discounts if you have a certain level of retirement savings or a co-borrower with sufficient income.
  • Origination fees can be 1% to 5% of the loan amount. For a $10,000 loan, that would be $100 to $500. Toms says, “A good lender will be up-front about fees.”
  • Terms typically range from 36 to 60 months.
  • Unlike a credit card, which allows endless minimum payments, a personal loan often has a fixed payment schedule and an end date. It’s important to keep up with the schedule as missed payments will hurt your credit.

The application process for a personal loan involves a look at your income, employment, and credit. Most personal loans are unsecured, so homeowners won’t risk losing their homes with this type of financing as they do with a home equity loan. Different lenders have varying eligibility requirements, so it’s smart to shop around to find the best financing offers you can get.

2.) Credit card financing

If your credit limit is high enough, you can use a credit card when financing a new home comfort system. This can be a good idea if you plan to pay off the balance quickly, collect cashback, miles, or reward points, and avoid interest charges.

On the other hand, if you can’t pay off the balance quickly, a credit card can be an expensive choice because rates are usually higher than other types of loans.

You could also hurt your credit score if you max out one or more of your cards. That’s because your credit utilization—how much credit you use relative to how much you have available—is a component of your score.

Credit cards are relatively easy to get and usually more flexible than loans since there’s no set repayment schedule.

A smart way to get the most out of the credit card route is to get a new card product that offers a zero-interest introductory period. The longer, the better. That way, you won’t pay any interest as long as you pay off the purchase before the promotional period ends.

3.) Manufacturer’s HVAC financing program

Some HVAC equipment manufacturers, dealers, and retailers offer in-house financing for their products on-site. These programs are essentially credit cards or personal loans offered through the manufacturer or retailer.

Manufacturers that offer HVAC financing include Lennox, Carrier, and Trane. Retailers that offer it include Sears, Lowes, and Home Depot.

4.) Home equity financing

If the current market value on your home exceeds the balance you owe on your mortgage, congratulations – you have equity! You can tap into that equity to help pay for a new HVAC system.

Home equity financing typically offers lower interest rates than credit cards and personal loans because it is secured by your home. However, that means if you don’t make the monthly payments when they’re required, your house could be at risk of foreclosure. Being so, you must be comfortable with the payments.

There are four main ways to borrow against your home equity:

Home equity loan

If your home is worth more than you owe on it, you may be able to qualify for a home equity loan. Sometimes called a second mortgage, a home equity loan is an additional loan secured by your home’s equity.

You’ll receive the amount in a lump sum, so you’ll have to pay interest on the full amount from the beginning. But rates on this type of loan are typically lower than unsecured loans since your home is used as collateral.

Also, the interest paid may still be tax-deductible under the new tax law, so long as you use the funds to “buy, build, or substantially improve” your home. If you use the loan to pay for personal living expenses – such as credit card debt– the interest will not be tax-deductible.

You’ll want to look out for closing costs and fees, which could make this option more expensive than you’d like.

Home equity line of credit

A home equity line of credit (HELOC) is similar to a credit card in that it offers a credit line that you can borrow against up to your limit. Your credit limit will be determined by your income, debt, credit history, and how much equity you have.

Again, since your home is used as collateral, this option offers a lower rate than unsecured loans. This could save you money on financing. However, you risk losing your home if you can’t make on-time payments.

Cash-out refinance

Rather than getting a second mortgage, a cash-out refinance is done by refinancing your existing mortgage and getting a new loan for a higher amount. You will receive the difference between the two loans in cash, which you can then use on anything you want (such as a new HVAC unit!).

But beware of hidden costs and fees that come with the new mortgage, as it may end up being more expensive than a HELOC or home equity loan.

Frequently asked questions about HVAC financing

How do I finance a new HVAC system?

Financing a new HVAC system means you can split up the cost of a new unit to fit your budget better. There are many financing options, including personal loans, credit cards, manufacturer financing, and borrowing against your home equity. It’s best to compare your options, understand how credit decisions are made, and choose the financing product that best suits your situation (learn more above).

Once you know the type of loan you want, it’s time to shop around and compare financing offers to find the best deal. Then you sign the paperwork, buy your home comfort system (HVAC), and begin making repayments.

Should I finance my HVAC?

If you can’t afford to buy a new HVAC product out-of-pocket or don’t want to, financing is a good solution. The downside is the cost of financing (fees and interest), but you can minimize those costs by choosing the right solution. Be sure to shop around before making a decision and take advantage of reviews from a loan provider’s past customers. You can find helpful information to help you choose the best of your potential financing options.

Can I get tax credits for my HVAC improvements?

According to Trane, the federal tax credits have now expired. In the past, purchasing an energy-efficient product could qualify you for a credit to cover 10% of the installed cost (up to $500). But it’s always smart to ask your dealer if there are tax credits on offer for any of their products.

How much does a new heat and air unit cost?

Replacing an HVAC system can come with a price tag anywhere from $5,000 up to $10,000, averaging $7,000., according to Home Advisor.

However, Modernize points out that there are various combinations of heating and AC that you may need, and your decisions will impact the price. Here’s a quick rundown of their cost estimations:

Why is HVAC so expensive?

An HVAC installation includes the costs of both the products themselves and the installation by a specialized professional. HVAC units are expensive alone, and HVAC technicians must be certified in their state and continually take training to keep up with the latest industry updates. Plus, they have a variety of overhead costs to cover. As a result, you pay a hefty price tag.

How much does a new HVAC system cost?

It’s difficult to predict the cost of a new HVAC system without getting estimates from installation contractors. Several factors can affect the price, including:

  • The climate where you live.
  • The size of your home.
  • The brand of equipment you want.
  • The energy-efficiency of your system.
  • How many zones you want to set up.
  • How much of your system needs to be replaced.
  • ‌Labor costs in your local area.
  • Energy efficiency rebates from local utility companies.
  • Manufacturer’s rebates
  • State air-quality regulations.

However, here are some estimates of what a new HVAC system will cost based on the brand you choose.

The upside: lower energy bills

The upside of buying a new HVAC system is that newer systems are significantly more energy-efficient than older ones.

It may take many years for your annual energy savings to equal the cost of your new system, but your savings should offset at least some of the expense.

Meanwhile, you’ll be living in comfort— toasty in winter, cool in the summer, and with better air quality inside your home.

A good place to start is checking out the best personal loans.  Then, discover what personal loan rates you qualify for without hurting your credit score. You’ll receive competing offers from a number of top lenders and banks within minutes. After that, you can easily compare lenders side-by-side to find your best option.