How to Finance Your New HVAC System: The Choices are Plentiful

Buying a new HVAC system, or any kind of energy-efficient product can cost anywhere from $2,400 to $7,000 approximately. Such a major investment will pay off in the future as lower energy bills will compensate for your initial investment. Plunking down so much cash could give you pause, especially if you believe your current HVAC system can make it another few years. But many kinds of financing assistance are available to help you pay for a new HVAC system.

Manufacturer Rebates Help with Financing

Many different kinds of rebates exist for homeowners wishing to buy an updated HVAC piece of equipment. Oftentimes an HVAC manufacturer will provide a rebate on a new HVAC system you’ve purchased. These rebates will help to defray the expense of a new HVAC model as well as the cost to install your new HVAC unit. Your local utility company may also offer a rebate on an energy-efficient HVAC unit.

Manufacturer Financing

HVAC companies want to sell you their products, and are willing in many instances to provide financing. Financing can come through the use of a credit card that helps you make the most affordable monthly payment towards the purchase of a new HVAC system. There may also be promotional deals, a line of credit (if you qualify), and the tools to manage your account online. Another incentive some HVAC manufacturers provide for financing is you will not be penalized for paying off your purchase early.

More Financing Choices

Manufacturer and utility company rebates are only part of the financing picture. The federal government through its partnership with the Environmental Protection Agency (EPA) and the Department of Energy (DOE), offers federal grants and tax credits to assist you in upgrading your present heating or cooling systems, to make them more energy-efficient, as well as the installation of an energy-efficient new model.Following is a run-down of federal and state programs that you can apply to to receive grants, or tax credits on an upgraded or new HVAC system:

Government and Green Energy

If you invest in solar-powered and geothermal energy the federal government, in its efforts to encourage the use of green-energy products, will allow you to deduct the cost of upgrading your HVAC system to environmental-friendly sources of clean energy, instead of relying on fossil fuels.

Energy Star Tax Incentive

Energy Star, a program promoted by the EPA and DOE, is the best known and well-received energy tax credit you can use to apply for deductions on your annual income tax return. The Energy Star Tax Credit can be given to anyone that has bought a new AC unit, as much as $300. But a note of caution: it is not available for every AC unit on the market. So please be sure to inquire of your heating and cooling installation technician that your new heating and cooling units qualify as eligible for the Energy Star credit.

Limited Federal Energy Tax Credits

We say limited because Congress did not renew the many federal energy tax credits that are incentives for consumers to purchase new energy-efficient products. In particular Congress let the 25C Residential Energy Tax Credit for high-efficiency HVAC products fall by the wayside.But there still exist some grant programs, administered by the federal government, which will generously compensate consumers for new HVAC products. For example, those who live on fixed or low incomes, and find it necessary to buy a new HVAC unit are eligible for the Weatherization Program HVAC Tax Credit, funded by the DOE. DOE will pay 100% on the purchase of a new heating and cooling system. In addition eligible homeowners can be the recipients of grants to help pay for weatherization services. This can include new window installation, or installing weather-stripping around doors. Weatherization grants on average are $6,500, plus the DOE throws in the weatherization services for free.The Department of Housing and Urban Development (HUD) administers a Community Entitlement Grants (CEG) program in urban areas with populations ranging from 50,000–200,000 homes. HUD’s mandate is to replace outworn AC units with energy-efficient models.The U.S. Department of Agriculture (USDA) funds the Housing Preservation Grant Program (HPGP). The focus of this initiative is to offer financial help to homeowners, who want to make repairs or remodel their homes. HPGP targets communities, whose population is under 20,000.

State-Sponsored Programs

There exists no one-size-fits-all tax credit program for state governments to administer. Each state legislates its own version of an energy tax credit program. In many states the energy tax credit is targeted to assist homeowners in upgrading their heating and / or cooling systems. The energy tax credit can also be utilized to install a new green-energy HVAC unit.

Still More Financing Options

Yet another financing option for you to consider is a home equity line of credit. Find out from your mortgage holder if you meet eligibility requirements for a line of credit. The financing terms will be set according to the equity you have built up in your house, and the state of your finances.Also an option exists to get a personal loan from a bank at which you’ve been a long-standing customer, another way to go to finance a new HVAC system. A financial adviser is the best person to review your carefully-assembled documentation and decide what kind of loan will work best for you, and whether the loan will be secured or unsecured.The housing department, a local agency in your area, is also a good resource as well for a low-interest loan. What the housing department does is first decide if you meet its eligibility requirements for a new HVAC system. If you qualify the housing department will secure the loan for you with the lender. You may benefit from a lower interest rate as lenders will risk less in offering you this type of secured loan.You may find financing for your new HVAC system right in your own backyard from HVAC companies, who’ve provided you with price quotes. Find out if they offer financing (major contactors usually do). If you’re in relatively good financial shape you may qualify for terms, comparable to a personal loan from a bank.

The Steps to Financing Your HVAC System

The first order of business is to decide how much cash you can lay out to spend on a new heating or cooling system. If your present system has gasped its last breath, or you’re wanting to get a new HVAC system for its energy-efficiency benefits, many choices are out there by which you can finance a heating and cooling system.To position yourself to find the prime choices, your credit score must be above average, and your income adequate enough to meet the monthly payments, as well as covering your other current debts.If you’ve jumped through these hoops successfully, assemble a monthly budget containing an itemization of expenses. From this aggregate of monthly expenses make a decision on what you think you can comfortably afford.To prepare what might be asked of you when contacting various loaning institutions for a financing loan do the following:

• Assemble your most recent pay stubs from the last few months. For those who run their own businesses, a copy of your last year’s tax return will suffice to prove income eligibility.

• Look into your credit report to see that your payment status is current on every account. For debts that are paid in installments make extra payments on the ones you can to lower your debt in relationship to your income. Any invalid accounts you run across on your credit report, contact all three of the largest credit bureaus to request removal of those accounts. Support your request by providing documentation that substantiates why those accounts should not be on your credit report.

Letters of reference from energy companies that you have a history with of making utility payments on time will prove you are a responsible bill-payer. This would only need to be done if you either have a low credit score, or have not built up enough of a credit history. If you have established enough of a credit history with other creditors include this in your loan application.