Between cold winter days and hot summer days, we rely on our heating, ventilation and air conditioning (HVAC) systems to keep us comfortable in our homes. When that system is working properly, it regulates temperature, humidity and air quality. But when it breaks down, it can quickly become a big problem for homeowners.
That’s why it’s important to replace HVAC as quickly as possible — and that comes at a cost. There are many variables that go into determining the price of an HVAC replacement, such as the size of the duct and the current condition of the home, said Josh Conder, ARS Central Division manager.
“We go home and do a full energy analysis and heat load calculation to determine what works best for their individual situation,” Conder said. “You can go from an 80% furnace at the basic end to a multi-phase communication system that is 96% efficient at the end. So the range can be anywhere from $8,000 to $35,000.”
If buying that much cash isn’t possible, don’t panic. There are ways to finance your HVAC replacement so you can do it when needed but pay for it later.
What is an HVAC fee?
HVAC financing allows you to pay for your replacement over time with a payment plan or loan instead of paying the full amount up front. It’s the same process for financing a new car or getting a new home loan. Terms and conditions will vary depending on your specific loan.
How to finance your HVAC replacement
There are several ways to spread the payments for your HVAC replacement so you don’t have to pay up front. Here are five ways to finance the transition.
1. Contractor financing, or internal payment systems
Some homeowners choose to finance their HVAC replacement directly through their contractors. Often, contractors will work with lenders to offer payment plans to customers at the point of sale. If you’re looking for the fastest approval, this might be the way to go: You can apply online and may even get same-day approvals. Terms vary, but you can choose short-term financing (think six to 18 months) or long-term financing of up to 10 years.
Contractors will often offer you promotions when you finance this way, such as 0% interest. Without a promotion, your interests can be very different so it’s important to review all your options. Going this route may require a strict credit check, although some lenders offer qualifying procedures that won’t affect your credit score.
2. Production fees
Some HVAC manufacturers also partner with financial institutions to provide financing. Unlike when you finance a contractor, financing in this way is related to specific products of the manufacturer. The process has the same terms as the interest rate on contractor financing, and you’ll often be able to get promotions.
Just remember that with product financing, you’re limiting yourself to products from a specific manufacturer. Similarly when you apply for other types of loans, the lender will probably need to pull your credit report.
3. Home equity line of credit (HELOC)
A home equity line of credit or HELOC allows you to borrow against the equity of your home, essentially using your home as collateral. It is a revolving line of creditwhich means you can borrow as much as you need up to a certain limit (that’s different from a home loan, which offers a lump sum with a fixed rate). HELOCs often have lower interest rates and greater borrowing limits than unsecured loans.
But on the downside, you’re putting your home at risk: Making a mistake on a HELOC could result in your home being foreclosed on. This type of credit also has adjustable interest rates – so your rate can increase over time – and slower approval processes than manufacturer and contractor financing.
4. Personal loans
Personal loans do not cover home-related expenses such as HVAC system replacement, but you can use them for these projects. Unlike HELOCs, they don’t require you to borrow against your home equity.
Usually, if you are approved, you will receive a lump sum. Then you’ll pay it back (plus interest) in monthly installments. Most personal loan companies allow borrowers five years to repay the money, although you can get a loan with a longer term. Interest rates can vary greatly and depend on your credit score. A strong credit check is required, which may lower your credit score temporarily.
5. 0% promotional finance offers
In addition to getting a 0% promotional financing offer through contractors, you may be able to use a 0% annual APR credit card. These cards offer an introductory period — usually between six and 18 months — before the APR jumps. Because most credit cards come with it APRs over 20%these cards are ideal for people who will be able to pay off the balance before the end of the introductory term.
Opening a new credit card can use your credit card temporarily as it requires strict checks. But if you pay on time, having another credit card can boost your score by building your payment history, diversifying your credit mix and lowering your credit utilization ratio.
