How to finance heating and air conditioning systems

Replacing an HVAC system can be expensive and often urgent – you don’t want to wait to restore heat in winter or cooling in summer. This guide explains typical replacement costs, compares financing options, and shows how to choose the best way to finance new HVAC systems for your situation.

Why you should consider HVAC financing

The cost of a new or replacement HVAC system varies by property, material, and labor costs. One home may have an outdated HVAC system that needs replacement, while another may have been built without a system and requires a complete installation.

Learn more about signs that may signal you need an upgrade.

Signs your HVAC system needs an upgrade

It may be time to replace your HVAC system if:

• Your utility costs keep increasing.
• You struggle to keep a consistent, ideal temperature.
• You hear odd sounds or smell unusual odors from your HVAC vents.
• You notice more dust around the house than usual.
• An indoor air quality test finds mildew, mold spores, or other pollutants in your home.

Cost to replace an HVAC system

According to Angi, the cost to replace an HVAC system ranges from $5,000 to $12,500. Here are some average replacement cost estimates based on HVAC unit type:

Other factors that affect HVAC costs

That said, here are some of the factors that affect the cost of a new HVAC system:

• Ductwork: If your HVAC requires new or replacement ducts, expect to pay extra. For a 2,000-square-foot home, the average range is $2,100 – $4,000.
• Local conditions: Heat leaving or entering your home is measured in British thermal units (Btu). Depending on where you live, you may need an HVAC unit that meets the BTU requirements of your environment.
• Square footage: The size of your home directly affects how much you’ll need to spend on an HVAC unit. The average cost of an HVAC is $3 – $6 per square foot, so a 1,500-square-foot home would cost an estimated $4,500 – $9,000.
• Warranty: If you’re buying a new air conditioner or furnace, you might want to purchase an extended warranty to protect your investment.
• The HVAC company: The price ultimately will depend on which company you buy your system from. Higher-end systems may cost more but may last longer than cheaper brands.

Air conditioner and furnace financing options

Since the cost to install an HVAC system can vary by system type and other factors, it’s important to understand your financing options.

Personal loan

Personal loans are a popular choice for financing home improvement projects. Interest rates can be higher than with a secured loan, so make sure you can afford the monthly payments. Common loan requirements include:

• Credit score. Your credit score affects your interest rate, loan terms, and whether you get approved for a loan. Applicants with scores of 740 or higher tend to receive the best rates and terms.
• Loan interest rate. Interest rates on personal loans vary from around 6% to 30%. Your rate will affect your total interest costs and monthly payment. For example, loans with higher rates have higher total costs and monthly payments.
• APR and loan fees. Loan fees, such as origination fees, can add to the cost of a personal loan. To gauge a personal loan’s total cost, check its annual percentage rate (APR), which averages the loan's annual cost, including interest and fees. The lower the APR, the more affordable the loan.
• Application process. The loan process requires you to complete a loan application and submit documentation like proof of identification, bank statements, pay stubs, and tax forms.
• The funding time frame. Lenders can take up to a few days to approve your personal loan and release the funds. Rocket Loans¹ often can fund your loan the same day it is approved.²

Cash-out refinance

A cash-out refinance³ is another way you, as a homeowner, can finance an HVAC installation. You refinance your current loan into a new loan based on your home's current fair market value. After you pay off your current loan, you keep the difference in cash and repay it as part of your new mortgage. The amount you can borrow depends on how much home equity you have.

Since you're applying for a new mortgage, you'll need to qualify for one. That means you'll need to meet the requirements for creditworthiness, debt-to-income (DTI) ratio, and other factors, depending on your finances and the type of loan you choose.

Home equity loans

A home equity loan is a second mortgage that uses your equity as collateral. Home equity loans are a popular way to pay for home improvements. You must meet credit and DTI requirements to qualify and have enough equity to borrow. Unlike with personal loans, it can take weeks for a home equity loan application to be fully processed and to receive your money. The other caveat is that you'll have to put your home up as collateral to borrow the funds.

If you fail to make your monthly payments on the loan, you could end up losing your house through foreclosure.

Home equity line of credit (HELOC)

A home equity line of credit (HELOC) is similar to a home equity loan in that it lets you borrow your home equity. Instead of receiving a lump-sum amount, a HELOC is a line of credit you can draw from as needed up to a set limit. A HELOC usually has a draw period during which you can access the line of credit, followed by a repayment period where you repay what you borrowed.

While Rocket Mortgage offers Home Equity Loans, it doesn't currently offer HELOCs.

FHA loans

You also can finance an HVAC installation with FHA loan programs:

• FHA Title I Property Improvement Loan. Title I loans are fixed-rate home improvement loans that can be used to pay for new appliances, such as an HVAC unit. The FHA requires you to meet specific credit and income criteria. Also, your home must meet U.S. Department of Housing and Urban Development-related standards.
• FHA 203(k) Loan. If you refinance with a 203(k) loan, you can roll an HVAC replacement into the new mortgage. You must meet FHA requirements to qualify, and the necessary renovations must cost at least $5,000.
• FHA Energy-Efficient Mortgage Loan program: The FHA’s EEM program offers borrowers the funds to upgrade their home and appliances to be more energy-efficient. While HVACs with higher energy savings may cost more up front, you could see a much lower utility bill over time.

Alternatives to HVAC loans

If applying for an HVAC loan isn’t the best choice in your financial situation, consider alternative financing options:

HVAC company financing

Many HVAC retailers offer financing through third-party lenders. These programs may offer convenient monthly payments, but pay attention to the interest rate, which may be higher than that of a personal loan.

Zero-interest APR credit card

With a strong credit score, you may receive a promotional offer from a credit card company for a credit card that offers an initial zero percent interest rate. This interest-free period may extend for 12 to 18 months. However, it’s important to make a financial plan to pay down the balance before this promotional period ends and your credit card balance starts accruing higher-rate interest.

Emergency fund

If you have a substantial emergency fund, you could use it to pay for your new HVAC system. While this allows you to avoid taking on additional debt, you also must remember to replenish your savings to protect yourself against future income loss and other financial emergencies.

FAQ

Here are answers to common questions about financing HVAC systems.

What’s the best time to buy a new HVAC system?

In most cases, prices for a new system will be lower in the spring and fall. That’s because HVAC companies face less demand at those times and are therefore more likely to offer HVAC systems to their customers at reduced cost.

How can I get HVAC financing with bad credit?

Thankfully, even with a low credit score, a few options are still available. These include credit cards and financing from HVAC companies. But keep in mind that you might face higher interest rates using those options. To help save money, you could improve your credit score. This extra effort might give you access to financing with lower interest rates, such as a personal loan or home equity loan.

Can I refinance an HVAC loan?

Depending on the type of loan you used, a refinance may be possible. If you have a personal, home equity, or FHA loan, you may qualify for a refinance. To find out the eligibility requirements, you can contact your lender for more information.

The bottom line: Stay comfortable all year-round with HVAC financing

Replacing an HVAC system can cost $5,000 – $12,500, though prices vary by unit type, home size, and other factors. Whether you choose a personal loan, a cash-out refinance, a home equity loan, or a HELOC, financing the project can make it more affordable.

Ready to get started? Explore your borrowing options today with Rocket Loans to get the funding you need for a safer and more comfortable home.

¹ All personal loans are made by Cross River Bank, a New Jersey state chartered commercial bank, Member FDIC, Equal Housing Lender. All loans are unsecured, fully amortizing personal loans. Eligibility for a loan is not guaranteed. This is not a deposit product. Please refer to our Disclosures and Licenses page for state-required disclosures, licenses, and lending restrictions.

Borrower must be a U.S. citizen or permanent U.S. resident alien at least 18 years of age. All loan applications are subject to credit review and approval. Offered loan terms depend upon your credit profile, requested amount, requested loan term, credit usage, credit history and other factors. Not all borrowers receive the lowest interest rate. To qualify for the lowest rate, you must have excellent credit, meet certain conditions, and select autopay. Rates and Terms are subject to change at any time without notice.

Please refer to our Terms of Use and please refer to Rocket Loans’ Privacy Notice and Cross River’s Privacy Notice to learn more about what we do with your personal information.

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² Same Day Funding available for clients completing the loan process and signing the Promissory Note by 4:00PM ET on a business day. Also note, the ACH credit will be submitted to your bank the same business day. This may result in same day funding, but results may vary and your bank may have rules that limit our ability to credit your account. We are not responsible for delays which may occur due to incorrect routing number, account number, or errors of your financial institution.

³ Refinancing may increase finance charges over the life of the loan.

Rocket Mortgage, LLC, RockLoans Marketplace LLC (d/b/a Rocket Loans), Rocket Close, LLC, and Rocket Money, Inc. are separate operating subsidiaries of Rocket Limited Partnership. Redfin Corporation is an affiliated business. Each company is a separate legal entity operated and managed through its own management and governance structure. Rocket Limited Partnership and Redfin Corporation are wholly owned subsidiaries of Rocket Companies, Inc. (NYSE: RKT).