Heat Pump Finance: What You Pay After the Grant and How a Loan Can Spread It

You can finance a heat pump in two parts. The Boiler Upgrade Scheme grant (£7,500 for an air-to-water heat pump, £9,000 for oil or LPG homes off the gas grid until March 2027) comes off your installation price, and the GOV.UK factsheet says a Warm Homes loan can be used alongside it to spread the cost.

Correct as of 6 November 2026. Amounts and dates come from the GOV.UK Warm Homes Loan Scheme factsheet (27 October 2026) and the GOV.UK notice of approved grant values (updated 20 October 2026). Scheme rules can change, so check the date before you rely on a figure.

The Warm Homes Loan Scheme supports loans, provided by lenders, for improvements like heat pumps, solar panels and batteries. A Warm Homes loan for a heat pump is a separate agreement, and the lender decides whether to lend to you.

GOV.UK sets three conditions in its eligibility list:

• You own the property: with or without a mortgage
• It is in the UK: the loans are not limited to England
• It is a home: residential, not commercial

Lenders may add rules of their own and run normal affordability and credit checks. GOV.UK's eligibility list does not set an income limit. You usually need an MCS certified installer, and you cannot do the work yourself.

The maximum loan supported for each technology is:

• Air-to-water heat pump: up to £20,000
• Ground source heat pump: up to £35,000
• Air-to-air heat pump: up to £10,000, when MCS certification is available
• Solar panels or a battery: up to £15,000 each

The loan is repaid with interest, though the government has worked with lenders to cut rates by up to 5 per cent compared with regular loans, and some loans are interest free. GOV.UK gives one example. A homeowner borrowing £10,000 at 8% over seven years pays around £155 a month on a standard loan, and the scheme could save up to £285 a year on repayments.

Ten lenders were offering loans at launch, and some work only with particular installers. GOV.UK says more lenders and products are expected.

0% VAT on a heat pump installation in a home applies until 31 March 2027, and the rate reverts to 5% from 1 April 2027. HMRC's VAT notice sets those dates.

The date your installation falls on can change the VAT on your quote, so ask how it has been worked out.

The order matters because the grant and the loan both depend on the quote. In practice it runs like this.

• Survey and quote: a survey checks the home, and the quote shows the grant taken off the price.
• Grant application: the installer applies to Ofgem on your behalf, and Ofgem contacts you to confirm that.
• Loan application: you apply to a participating lender or through an installer. The lender runs affordability, credit and eligibility checks. Look at the total you will repay, including how long it takes and any monthly fees.
• Installation: the heat pump is fitted and commissioned. Our page on heat pump installation walks through what happens on site.
• Records: keep the quote, finance agreement, invoice, proof of purchase and MCS certificate. The work might be audited afterwards.

An air-to-air heat pump has its own grant and its own loan cap, covered on its own page.