Heating Your Home: Heat Pump or Furnace?

When you think about why you need to control the temperature of your home, the heat keeping your home items from freezing in the winter is probably a key reason you think of. To get heat in the home, there are a few options to choose from, heat pump or furnace. The best option for your situation will vary based on which advantages are most beneficial to your home and area.

Here, we'll explore the primary differences between a heat pump and a furnace, including their cost, installation, performance and more. Then, we'll help you decide which is right for you.

What is a heat pump?

A heat pump is an energy-efficient alternative to a furnace and air conditioner. A heat pump uses electricity to transfer heat from a cool space to a warm one. In the winter, it takes the heat from outdoors and uses it to heat your home. During the summer, it moves the heat from inside your home to outside to cool your home. 

"The best way to describe a heat pump is an air conditioner with a reversing valve," said Melanie Powers, president at Goodberlet Home Services.

A heat pump is more efficient than a furnace because it doesn't actually generate heat -- it simply relocates it. Although it doesn't generate heat, it can still provide a comfortable temperature in your home.

There are several different types of heat pumps that you should know about:

• An air-source heat pump is the most common type. It sucks air through a coil which helps either heat or cool your home by transferring air between the inside and outside.
• A ground-source heat pump, also known as geothermal, operates along the same lines -- transferring heat from outside to inside, or vice versa -- but draws its heat from underground wells, rather than from the air.
• A gas-source heat pump, which is less popular, is similar to an air-source heat pump but has a natural gas-powered coil that boosts the heat production in the unit, according to Powers.

What is a furnace?

A furnace is the type of heating system that most homeowners are more familiar with. This home appliance uses fuel -- often natural gas, which consists primarily of the fossil fuel methane -- to generate heat in your home. Using either a pilot light or an electronic ignition, your furnace creates hot air and blows it through your home. 

The primary components of a furnace are the burner that burns the fuel, the heat exchangers that transfer the heat, a blower fan to distribute the heat in your home, and a flue to serve as an exhaust for gaseous by-products.

Here, too, there are different types of furnaces depending on the type of fuel they use.

• A gas furnace is the most common type. "It's a much warmer heat than an electric furnace," Powers said, because burning gas creates higher temperatures than electricity alone. One downside is that these furnaces generate carbon monoxide -- a toxic gas -- and other fumes that must be vented properly to keep your home safe.
• A propane furnace is more or less the same as a natural gas furnace but burns propane instead. These furnaces can be more efficient than natural gas, but those gains might not matter when propane is the more expensive fuel. And again, carbon monoxide is a concern here. 
• An electric furnace uses electricity to warm up a heat bank that boosts the temperature of the air before blowing it through your home. The advantage here is that there's no combustion, and therefore no risk of fire or carbon monoxide poisoning in your home.

The most advantageous type of fuel for a furnace also depends on current energy prices. When electricity rates are high, a gas or propane furnace might win out. But the opposite is true if gas or propane prices surge.

Heat pump vs. furnace

Cost

One of the first questions that homeowners are likely to ask when comparing a heat pump and a furnace is which costs more. First, your costs will depend on what your home is already equipped for. Homes with direct access to gas may find that a furnace is more affordable. On the other hand, a home without gas access will likely pay more to install the furnace. Everything else being equal, a heat pump is usually more affordable.

That said, the cost might change if your system qualifies for a tax incentive. Both heat pumps and some high-efficiency furnaces are eligible for 30% tax credits in the federal Inflation Reduction Act. Your local utility might have additional rebates that could change the equation.

Maintenance

While both a heat pump and a furnace will require some recurring maintenance, the maintenance requirements for a furnace are lower than those for a heat pump. As a result, your long-term maintenance costs will also be greater for your heat pump.

Performance

The performance difference between a heat pump and a furnace varies significantly depending on where you live. Remember that while furnaces generate heat, heat pumps only transfer it from the outside. In moderate temperatures, a heat pump is likely to work better. That's not to say a heat pump won't work in colder climates -- certain heat pumps can draw heat from outside even when the temperature is below freezing. 

The colder it gets, the more difficult it is for the heat pump to transfer heat. "Heat pumps just really aren't good in certain climates," Powers said. Meanwhile, a furnace will continue to generate heat even in cold climates. 

Energy usage

One of the greatest benefits of a heat pump is its energy efficiency. As we've mentioned, furnaces generate heat while heat pumps only transfer it. As a result, heat pumps need significantly less energy to operate. That being said, remember that heat pumps have to work harder than furnaces in cold weather to keep your home warm. If you live in a cold climate, a furnace may actually be more energy efficient.

Expected lifespan

A properly maintained gas furnace can have a lifespan of 20 years or more. On the other hand, even a well-maintained heat pump heater will have a lifespan closer to 15 years. 

Appearance

If you already have a central air conditioning system in your home, swapping it for a heat pump (which, remember, also provides A/C) wouldn't change the appearance of your home at all.

"You would not know the difference between an air conditioner and a heat pump, they look exactly the same," Powers said, referring to the boxy unit that would sit outside your home.

If your home doesn't already have ductwork from an A/C, you might end up installing a mini-split heat pump system, which does have more of an aesthetic impact. With mini-splits, there will still be a smaller outdoor unit to install, but the other half of the system consists of wall-mounted units throughout your house that blow air into each zone.

With furnaces, the actual heating unit usually lives out of sight in your basement or attic. Two pipes need to run out the side of your house for proper ventilation, Powers said, which does impact the appearance of your house.

Installation

If you're retrofitting an existing home, installation depends on what you already have.

Again, if you already have ductwork from an A/C system, installing a heat pump is an easy swap, and it's unlikely to be invasive or costly. If your home doesn't have ductwork, you'd be more likely to get mini-split heat pumps, which avoid the cost and inconvenience of installing ductwork.

Furnaces also require ductwork, and installing it from scratch would involve ripping up walls to install the ducts and vents.

Tax incentives

The federal government is currently helping homeowners cover a significant chunk of the cost of new heating systems. The tax rebates in the Inflation Reduction Act cover up to 30% of the cost of heat pumps and high-efficiency furnaces. You can ask your installer if the system you want qualifies for the credit, which could significantly change the cost calculus. 

There might also be incentives offered on the state level, or by your local utility company, Powers said. Sometimes those incentives cover the heating system itself, but there are also smaller rebates for parts like a variable-speed blower motor for furnaces, Powers said. 

Watch this: Be smart and save money warming your home this winter

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The bottom line: Which is better for you?

For more moderate climates, heat pumps are the clear winner. In "southern states, heat pumps are fantastic…The more heat you have outside, the better these are operating," said Powers. That's because, as long as temperatures usually don't dip below freezing, heat pumps are really efficient at transferring heat into your home.

In northern climates, where winters are more severe, Powers advises going with a furnace, or a special inverter heat pump that can perform in lower temperatures but is also more expensive. Powers said it really comes down to this question: "Do I have the right climate for this to be energy efficient?"

Your decision could also be swayed by local financial incentives. All else being equal, an extra $1,000 off a heat pump could make that the obvious choice. 

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