Replacing a furnace with a cold-climate heat pump: costs and questions

Replacing a furnace and central air conditioner with a cold-climate ducted heat pump typically costs $15,800 in Canada, with most installs between $12,300 – $20,500, before GST/HST. A two-stage or variable-speed standard model costs about $12,000, and a basic single-stage system about $9,800. In most of the country, the cold-climate unit is the one to price.

What the price covers

Our estimate is for a 3-ton ducted system that reuses your existing ductwork. It includes:

• removal and haul-away of the old furnace, AC condenser and coil
• a new outdoor heat pump and matching indoor air handler
• a new refrigerant line set, outdoor pad, disconnect and condensate drain
• brazing, pressure test, vacuum, refrigerant charge and commissioning
• a dedicated electrical circuit and disconnect, run by an electrician
• a thermostat compatible with the heat pump, and cleanup

We build it from the hours the installation takes, multiplied by local HVAC and electrical rates, plus equipment, and check it against market prices and real quotes. Adjust the system size in the calculator on Heat pump installation.

Not included: duct repairs or resizing, a panel or service upgrade, permit fees and GST/HST.

Why "cold-climate" matters

Every air-source heat pump loses heating capacity as the outdoor temperature drops. A standard model can be fine in a mild coastal climate, but in a Prairie or northern Ontario winter it will lean heavily on backup heat for weeks. A cold-climate heat pump uses an inverter compressor designed to keep delivering useful heat much further into the cold, so it carries more of the season on its own.

That extra capability is what you pay for in the premium tier. In Ontario it also decides whether you get a rebate: Home Renovation Savings covers cold-climate air-source heat pumps only.

Backup heat: strips or keep the furnace

On the coldest nights, most heat pumps need help. There are two common setups:

• Electric backup. Heat strips in the air handler switch on when the heat pump cannot keep up. Simple, but they draw a lot of power, which can mean a panel upgrade and higher bills on the coldest days.
• Dual fuel. The existing gas furnace stays and takes over below a set outdoor temperature. The heat pump can often be smaller, and there is no extra electrical load for backup. The trade-off: you keep a gas connection and its fixed charges.

Which one suits you depends on your electricity and gas prices, the size of your electrical service and whether you want to leave gas altogether.

Rebates in 2026

• Canada Greener Homes Grant and Loan are closed; the deadline for grant documents was 31 December 2025.
• Oil to Heat Pump Affordability (federal) offers up to $10,000, or up to $25,000 where co-delivered with the province, for oil-heated homes. Applications closed on 31 July 2026 in Alberta, Manitoba, the Northwest Territories, Quebec and Saskatchewan.
• Ontario Home Renovation Savings pays up to $7,500 for a cold-climate air-source heat pump in homes heated by electricity, oil, propane or wood, or up to $2,000 for gas-heated Enbridge customers. Pre-approval and a participating contractor are required.

Other provinces and utilities run their own programs; check before you sign, because pre-approval is often a condition.

Questions to ask every installer

1. Will you do a room-by-room heat loss calculation? Sizing a heat pump by the old furnace's rating or by floor area usually oversizes it. A proper calculation often shows a smaller system is enough.
2. How much heat does this model deliver at our design temperature? Ask for the capacity at low outdoor temperatures, not just the nominal tonnage, and how much of the winter it can cover without backup.
3. What backup heat do you propose, and when does it switch on? Get the setup in writing: strips or dual fuel, and the outdoor temperature at which backup takes over.
4. Are my ducts up to it? A heat pump delivers air at a lower temperature than a furnace, so leaky or undersized ducts are more noticeable. Ask them to check airflow and leakage.
5. Does my electrical panel have room? A heat pump with electric backup is a large load. Find out now whether you need a panel or service upgrade, not on installation day.
6. Where will the outdoor unit go? It should sit on a stand or bracket above the snow line, away from roof drip and with a path for defrost meltwater that will not freeze on a walkway.
7. Are you a participating contractor for the rebate I'm applying for? Get pre-approval sorted before work starts.
8. Who pulls the permits? Electrical, gas and plumbing work needs licensed trades and usually a permit.
9. What warranty comes with it? Ask about both the manufacturer's warranty and the installer's warranty on labour, and whether registration is required.

Ductless as an alternative

If your home has no ducts, or you only need to heat and cool part of it, ductless mini-splits may be the better fit. Three single-zone units typically cost $10,000; see Ductless mini-split.

Check the quote

Our figures are before GST/HST, so add 13% HST in Ontario or 5% GST in Alberta, for example, when you compare. Then run the pre-tax price through our "Is my quote fair?" tool, which compares it with what homeowners in your area typically pay for the same job.