Here at Coral, we talk about heat pumps a lot. You could say we're obsessed. And why wouldn't we be? Upgrading to a heat pump will help you save money, live more comfortably, and reduce your carbon footprint!

But heat pumps are a bit more expensive than a furnace or A/C unit. The exact cost depends on where you live and the details of your home, but they're typically 20–25% more expensive than traditional systems. For most US households, the energy savings that heat pumps deliver more than make up for the upfront cost— especially when incorporating local incentives and new subsidies from the Inflation Reduction Act — but the initial cost of a heat pump can still be a barrier for many.

Luckily, there are several affordable ways to finance a heat pump! Here's a primer on the financing options to consider when planning your heat pump purchase:

First, check for energy efficiency programs: Many state and local governments offer subsidized loans to help homeowners purchase heat pumps and other energy-efficient upgrades for their homes. These programs typically offer the best rates and repayment terms, especially when compared to personal loans. Often these financing plans only apply when working with pre-approved contractors and specific heat pump models, which are usually listed on these programs' websites, so check these requirements first before reaching out to contractors or lenders.

Talk to your local contractor: Many contractors will also help you finance your heat pump, offering financing plans from leading manufacturers or 3rd party lending partners. These plans can include low-interest loans or deferred payment plans, and your contractor can often help you confirm eligibility and process your application. When meeting with contractors we always recommend asking about the financing options they can offer.

Home Equity Loan or Line of Credit: If you own your home, you can also consider using the equity in your home to finance a heat pump purchase through a home equity loan or a home equity line of credit (HELOC). These options typically have lower interest rates than personal loans, but your home will be used as collateral. This can be an attractive option, but make sure to speak to your bank to fully understand the terms before refinancing.

Personal Loans: Finally, you can apply for a personal loan from a bank or a credit union to finance your heat pump. Personal loans typically have fixed interest rates and repayment terms, though the specific rate and terms will depend on your credit score, income, and other factors. Financing a heat pump with a personal loan can still pay off, but the terms will likely be the worst compared to the other options above, so we recommend exploring other options before applying for a personal loan.

Hopefully, this explains the many ways you can afford a heat pump, but before choosing a financing plan make sure you fully understand the interest rates, fees, and repayment terms of your plan. Consider your budget and financial goals before deciding on a financing option.

For a personalized estimate and more heat pump and home electrification resources, sign-up for Coral. We're on a mission to help homeowners sustainably heat and cool their homes — and we'd love to help you too!