Home Heat Pump Guide

Heat Pump Funding Options Beyond the BUS Grant

The Boiler Upgrade Scheme provides a valuable £7,500 towards a heat pump, but for many homeowners, there is still a significant amount to pay. A typical air source heat pump installation costs £9,000 to £15,000, meaning you might need to find £1,500 to £7,500 after the grant.

This guide explores every funding option beyond the BUS grant — from interest-free loans and green finance products to energy company schemes, manufacturer incentives, and creative ways to reduce your upfront costs. There are more options than most people realise.

Interest-Free Loans

Home Energy Scotland Loan (Scotland Only)

If you live in Scotland, Home Energy Scotland offers up to £7,500 as an interest-free loan on top of their £7,500 grant. This is the most generous loan product available for heat pumps in the UK.

  • Loan amount: Up to £7,500
  • Interest rate: 0% — genuinely interest-free
  • Repayment term: Up to 10 years
  • Monthly repayments: From approximately £62.50 per month (for the full £7,500 over 10 years)

This loan is available to owner-occupiers in Scotland and can be combined with the HES grant. It is one of the best financial deals available for any home improvement in the UK.

Credit Union Green Loans

Some credit unions across the UK offer green loans specifically for energy efficiency improvements. These loans typically have lower interest rates than mainstream personal loans and may offer more flexible repayment terms.

  • Typical interest rate: 3% to 8% APR
  • Loan amounts: £1,000 to £15,000
  • Repayment terms: 1 to 7 years
  • Advantage: Credit unions are not-for-profit, so rates are often competitive

Check with your local credit union to see if they offer a green or home improvement loan product.

0% Finance from Installers and Manufacturers

Many heat pump installers and manufacturers offer 0% finance or low-interest payment plans. This allows you to spread the remaining cost (after the BUS grant) over 12 to 60 months without paying interest.

How Installer Finance Works

  • Your installer partners with a finance company to offer credit
  • You undergo a credit check when applying
  • If approved, you spread the balance (after the BUS grant) over monthly instalments
  • 0% finance is typically available for shorter terms (12-24 months)
  • Longer terms (36-60 months) may carry a small interest charge

Example: 0% Finance After BUS Grant

  • Total installation cost: £12,000
  • BUS grant: -£7,500
  • Balance to finance: £4,500
  • 0% finance over 24 months: £187.50 per month
  • Total cost to you: £4,500 (no interest added)

When getting quotes, ask each installer about their finance options. Not all installers offer 0% deals, so it is worth asking specifically.

Manufacturer Finance Schemes

Some heat pump manufacturers run their own finance schemes, often in partnership with specific installers. These may offer preferential rates or longer 0% periods as a promotional incentive. Ask your installer whether the manufacturer of your chosen heat pump has any current finance offers.

Green Personal Loans

Several high street banks and building societies now offer "green" personal loans with reduced interest rates for energy efficiency improvements. These are standard personal loans with a green label and a lower rate.

Green Loan Features

  • Typical interest rate: 3% to 6% APR (compared to 5% to 10% for standard personal loans)
  • Loan amounts: £1,000 to £25,000
  • Repayment terms: 1 to 7 years
  • Eligibility: Standard credit check applies
  • Available from: Multiple high street banks and building societies

To qualify for the green rate, you typically need to state that the loan is for an eligible purpose such as a heat pump, solar panels, insulation, or an electric vehicle. No proof is usually required at the application stage, but some lenders may ask for evidence of the installation afterwards.

Is a Green Loan Worth It?

A green loan can make sense if you cannot afford the upfront balance after the BUS grant and your installer does not offer 0% finance. The key is to keep the term as short as you can afford — a £4,500 loan at 5% APR over 3 years costs approximately £135 per month and adds about £350 in total interest.

Energy Company Schemes

ECO4

The Energy Company Obligation (ECO4) scheme requires large energy suppliers to fund energy efficiency improvements for low-income and vulnerable households. If you qualify, your heat pump can be fully funded — no BUS grant needed, no loan needed, no cost to you at all.

ECO4 eligibility is typically based on receiving means-tested benefits or having a low household income. Contact your energy supplier or local authority to check eligibility.

Supplier-Specific Programmes

Some energy suppliers run their own heat pump programmes beyond their ECO4 obligations. These may include:

  • Subsidised heat pump installations for existing customers
  • Preferential electricity tariffs for heat pump owners
  • Heat-pump-specific tariffs with lower unit rates
  • Bundle deals combining a heat pump with a smart tariff

Contact your energy supplier to ask about any heat pump incentives they offer. The market is evolving rapidly, and new products are being introduced regularly.

Heat Pump Tariffs

While not direct funding, switching to a heat pump electricity tariff can significantly reduce your running costs and improve the overall financial case for a heat pump. These tariffs typically offer:

  • Lower electricity unit rates for heat pump consumption
  • Time-of-use tariffs that offer cheaper electricity during off-peak hours (when your heat pump can pre-heat your home and hot water)
  • Smart tariffs that integrate with your heat pump's controls to run when electricity is cheapest

A good heat pump tariff can save £100 to £300 per year compared to a standard electricity tariff. Over the lifetime of the heat pump (20 to 25 years), this adds up to significant savings.

Remortgaging and Green Mortgages

Green Mortgages

Some lenders offer green mortgage products that provide preferential rates for energy-efficient homes. If you are remortgaging or buying a home, a green mortgage can provide additional borrowing at a lower rate to fund a heat pump installation.

Additional Borrowing on Your Existing Mortgage

If you have equity in your home, you may be able to borrow additional funds on your existing mortgage to cover the cost of a heat pump (after the BUS grant). Mortgage interest rates are typically lower than personal loan rates, making this a cost-effective option — though you are extending the debt over a longer period.

Discuss this option with your mortgage advisor, and make sure the monthly repayments are comfortable before committing.

Local Authority Schemes

Many local councils offer additional funding that can be combined with the BUS grant or used as an alternative. These include:

  • Home Upgrade Grant (HUG): Up to £25,000 for off-gas-grid, low-income households
  • Local top-up grants: £1,000 to £5,000 additional funding in some council areas
  • Area-based schemes: Targeted programmes for specific estates, postcodes, or property types
  • ECO4 LA Flex: Councils can refer households to ECO4 under flexible eligibility criteria

Check with your local authority to see what is currently available in your area.

Community and Group Buying Schemes

Some communities organise group buying schemes where multiple households in an area agree to install heat pumps at the same time. This can reduce costs because:

  • Installers offer discounted rates for multiple installations in the same area
  • Equipment can be bulk-purchased at lower prices
  • Installation logistics are more efficient (less travel time between sites)
  • Savings of 10% to 20% compared to individual installations are common

Organisations like the Energy Saving Trust and some local councils facilitate group buying schemes. If one is available in your area, it is worth considering.

Using Savings and Investments

If you have savings, using them to fund a heat pump can be one of the most financially sound decisions — particularly in the current interest rate environment. Consider this:

  • A heat pump saves you approximately £100 to £400 per year on energy bills (depending on what system it replaces)
  • If you invest £4,500 of savings in a heat pump (after the BUS grant), your effective return is the energy savings plus avoided maintenance costs — potentially 5% to 10% per year
  • This return is tax-free (you do not pay tax on money you save on energy bills)
  • The return increases over time as energy prices rise

Of course, this only makes sense if you have savings you do not need for emergencies or other commitments.

Combining Funding Sources

The most effective approach is often to combine multiple funding sources. Here are some realistic examples:

Example 1: Maximum Grant Coverage (England)

  • BUS grant: £7,500
  • Local authority top-up: £2,500
  • Total funding: £10,000
  • Installation cost: £12,000
  • You pay: £2,000

Example 2: Grant Plus Finance (England)

  • BUS grant: £7,500
  • 0% installer finance over 24 months: £4,500
  • Installation cost: £12,000
  • Monthly payment: £187.50 for 24 months

Example 3: Scotland Maximum Support

  • HES grant: £7,500
  • HES interest-free loan: £4,500
  • Installation cost: £12,000
  • Upfront cost: £0. Loan repayment: £37.50/month for 10 years

For a personalised estimate, use our heat pump calculator.

What to Avoid

While exploring funding options, be cautious of:

  • High-interest credit cards. At 20%+ APR, credit cards are an expensive way to fund a heat pump. A personal loan or green loan is almost always better
  • Unregulated finance providers. Only use FCA-regulated lenders. If an installer offers finance, check that the finance company is properly regulated
  • Buy-now-pay-later with hidden costs. Some deferred payment schemes charge high interest after the initial interest-free period. Read the terms carefully
  • Paying for a grant. You should never pay anyone to access the BUS grant or any government scheme. These are free to apply for. If someone asks you to pay a fee, it is likely a scam

Frequently Asked Questions

What is the cheapest way to fund a heat pump after the BUS grant?

The cheapest option is 0% installer finance or, if you are in Scotland, the Home Energy Scotland interest-free loan. After that, a green personal loan at a low APR is the next best option.

Can I get a heat pump installed with no money upfront?

Yes, in several ways: ECO4 for eligible low-income households covers the full cost; Home Energy Scotland's grant plus loan combination covers most or all costs in Scotland; and some installers offer finance that covers the balance after the BUS grant.

Can I combine the BUS grant with installer finance?

Absolutely. The BUS grant reduces the total cost, and you can then finance the remaining balance through your installer's credit offering. This is a very common arrangement.

Are green loans really cheaper than normal loans?

Generally yes, by 1% to 3% APR. On a £5,000 loan over 3 years, this could save you £75 to £225 in interest. It is worth checking green loan rates alongside standard personal loan rates to compare.

Can I use a green mortgage to fund a heat pump?

If you are remortgaging, some lenders allow additional borrowing for energy improvements at preferential rates. This can be cost-effective but means spreading the debt over your mortgage term. Speak to your mortgage advisor.

What funding is available if I do not qualify for the BUS grant?

If you do not qualify for BUS (for example, because you are in Northern Ireland or your property is a new build), you can still access green loans, installer finance, and potentially ECO4 or local authority schemes. See our complete grants guide.

Need help finding the right funding? Get free quotes from MCS-certified installers who can advise on finance options alongside the BUS grant. Use our heat pump calculator to estimate your total costs, or read our guide to find out how much the heat pump grant is worth.