How to Borrow for a Heat Pump or Insulation Without Paying More Than You Save

Heating work is one of the few home improvements that can pay part of its own bill. A heat pump, a better-insulated loft or cavity wall fill lowers what you spend each month, and borrowing for it only makes sense if the repayment sits comfortably against that saving. Some loans fail that test badly, and the monthly figure on a quote rarely tells you which.

This guide compares the main ways to borrow for green home improvements in the UK, including the new government-backed Warm Homes Loans, and ends with a payback check you can run on any offer before you sign.

This guide is general information, not financial advice. I am a heating installer, not a financial adviser. For free, impartial guidance, see MoneyHelper.

Grants first, borrowing for the gap: how much do you need to finance?

Start with money you do not have to repay. Depending on where you live, your income and your property, the Boiler Upgrade Scheme, ECO-funded work or a local authority scheme may take part of the cost off first. See which heating grants you can claim for who qualifies.

• Get a written quote, then subtract any grant. Ask whether the figure is before or after the grant, or you could pay interest on money you were never going to pay.
• Split essential from optional work. A heat pump often brings a new cylinder, larger radiators or pipework. Know which parts are needed for it to work, because the optional part is where you can trim the loan.
• Put down what you can from savings. Even a modest deposit cuts the interest and can move you into a better rate band.

Your borrowing options compared

Warm Homes Loans: the new government-backed loans

On 26 October 2026 the government announced the Warm Homes Loan Scheme as part of the Warm Homes Plan. Ten lenders are taking part, offering loans for heat pumps, solar panels, batteries and other clean energy products at rates up to five percentage points below their usual rates. Some households may get 0%.

• Terms run from three years up to 30 in some cases. A long term lowers the payment but adds a lot of interest, and can outlast the equipment.
• Some loans are secured, such as second-charge loans on your home. Check before you apply.
• You can combine a Warm Homes Loan with the £7,500 Boiler Upgrade Scheme grant in England and Wales.
• Not open yet: eligibility and the opening date are still to be confirmed. Lenders still check affordability.

For the wider Warm Homes Plan, see my Warm Homes Plan guide.

Unsecured personal loans: when the simplicity is worth the rate

An unsecured personal loan is the most direct route. Nothing is secured on your home, so if you fall behind the lender cannot take the house, though it can pursue the debt and damage your credit record. You know the monthly payment, term and total repayable up front, with no valuation or solicitor.

The cost is the rate. Unsecured borrowing is usually dearer than borrowing against a property, many lenders keep their best rates for mid-sized loans, and terms are shorter, commonly up to about ten years. That suits insulation, where sums are smaller and three or five years is realistic. A full heat pump system often needs a longer term than most personal loans allow.

The headline representative APR only has to be offered to at least half of accepted applicants. Ask for a personalised quote, which most lenders give with a soft search that leaves no mark on your credit file.

Remortgaging, further advances and secured loans

Borrowing against the property usually gives the lowest rate and the longest term. That is also what makes it the most expensive route if you are careless about the term.

• Remortgaging: replace your mortgage and borrow extra. Sensible if your deal is ending anyway. Mid-deal, check the early repayment charge, which can run to thousands, plus arrangement, valuation and legal fees.
• Further advance: extra borrowing from your current lender, often as a separate slice with its own rate and term, without repricing the whole mortgage. Ask what rate applies to the new slice and when it ends.
• Second charge loan: sits behind your mortgage, useful when you do not want to touch a good fixed rate. Rates and fees are higher than a mortgage, your lender may need to consent, and fees added to the loan attract interest.

All three are secured on your home, so missed payments can lead to repossession. And spreading £10,000 over 25 years means paying interest for a quarter of a century on equipment that will not last that long. Keep the term no longer than the working life of what you are buying: roughly 15 to 20 years for a heat pump. Taking a mortgage-rate slice on a shorter term, or overpaying, gets you the low rate without that trap.

Installer finance and 0% offers: what the monthly figure hides

Many installers offer finance with the quote through a partner lender, and 0% offers are common. Handled carefully, it can be the cheapest borrowing available. Put these questions to the installer in writing before you agree:

1. What is the cash price?If the finance price is higher than paying outright, the interest is hidden in the headline. 0% on an inflated price is not free.
2. Is there a deposit?An upfront payment reduces the amount financed and changes the real cost.
3. Term and total repayableA low monthly payment over a long term can still add up to a lot.
4. Deferred interest?Some offers charge interest back to day one if you miss the end of the interest-free period. Ask exactly what triggers it.
5. If the job goes wrongAsk the lender, not only the installer, how a dispute over late, incomplete or faulty work is handled.
6. Early settlementIf you clear the balance early, is there a charge?

Be wary of pressure to sign on the day. Installers may earn commission from the finance provider, which is not wrong in itself but is a reason to compare their offer with a loan you arrange yourself. Anyone arranging finance should be authorised by the Financial Conduct Authority. My guide to choosing a heat pump installer shows how to compare firms on quality rather than the friendliest monthly number.

Green mortgages and green loans: what the label does and does not guarantee

“Green” in a product name tells you how the lender markets it, not that the rate is low.

• Green mortgages reward a home that already has a high EPC rating, with a lower rate or cashback. They do not fund an upgrade.
• Green further advances offer a discount on extra borrowing for energy-efficiency work. These are the closest match, but each lender’s list of qualifying work differs.
• Green personal loans are personal loans with a green label and sometimes a small rate cut for work such as a heat pump or solar.

A slightly lower rate with a bigger arrangement fee can cost more over a two- or five-year deal, so compare the total cost including fees. And ask for the list of qualifying work before you apply: some cover a heat pump but not radiators, or insulation but not a cylinder.

Scotland, Wales, England, and what landlords can borrow for

• Scotland: the Home Energy Scotland Grant and Loan offers homeowners up to £7,500 grant for clean heating and up to £7,500 for energy efficiency, with up to £1,500 more each in rural areas, plus an optional interest-free loan. Private landlords are not eligible but can apply for the separate Private Rented Sector Landlord Loan. See Home Energy Scotland.
• Wales: Green Homes Wales, run by the Development Bank of Wales, offers interest-free loans for measures including insulation, heat pumps and solar panels. The Nest Warm Homes scheme gives free advice and, for qualifying households, no-cost upgrades. See Climate Action Wales.
• England: Warm Homes Loans are the first national low-cost loan, once applications open. Some councils and community lenders run their own schemes, so your council’s website is worth ten minutes.

Landlords facing the rental EPC C requirement have broader options: a buy-to-let further advance or remortgage, assessed on rental income; an unsecured loan for smaller insulation jobs; or installer finance, once you check the lender will fund a let property. How the cost and interest are treated for tax depends on your circumstances, so speak to an accountant. See the landlord’s checklist for getting a rental to EPC C; in a small flat, an electric boiler can reduce how much you need to borrow.

The payback check: set the repayment against your savings

This is the test that separates good borrowing from expensive borrowing. It takes four numbers and about ten minutes.

Paying more each month than you save can still be a reasonable decision if you value comfort or want to move off gas, but make it knowing the figure.

The saving is the weakest number, so treat it carefully:

• Insulation savings depend on how much heat the house loses now. Ask for an estimate for your property and the assumptions behind it.
• A heat pump replacing gas may save little, and in some homes can cost more. See ten years of running costs: heat pump or gas boiler.
• A heat pump replacing electric, oil or LPG heating usually saves more, which makes borrowing easier to justify.
• Re-run the check when a fixed rate ends. A cheap introductory rate on a long loan can turn the sum negative later.

If the check fails, you have four options: borrow less with a bigger deposit or less optional work; choose a longer term that still ends within the equipment’s life; find a lower rate; or wait for a grant or scheme that cuts the amount you need.

Common questions

Borrow against a real figure

Every comparison above depends on the price of the work, and an estimate can be a long way from a surveyed, itemised quote. Once you know how you want to pay, get a quote so you are borrowing against a real figure.