Home Improvement Skills & Specialties HVAC

How to Choose a Tankless Water Heater

Pros and Cons of Switching to a Tankless Water Heater

Tankless hot water system in the basement of a Green Technology Home
Mark Hunt / Getty Images

Tankless water heaters meet the demand of a modern home that needs a lot of hot water when a storage water heater tank may not be enough. In homes where many people take showers or baths simultaneously, use large-capacity washing machines, and run the dishwasher, a tankless water heater helps solve the problem of hot water running out.

Tankless water heaters are also known as on-demand or instantaneous water heaters because they don't usually store hot water; they create hot water on demand. Unlike traditional water heaters with a large water storage tank that requires a lot of space, a tankless water heater doesn't waste as much space or energy.

Tankless water heaters have some pros and cons. Review all the factors to consider before buying a tankless water heater unit.

What Is a Tankless Water Heater?

Tankless water heaters provide hot water only as needed, unlike storage water heaters with 50-gallon tanks always being heated on standby. Avoiding standby heat loss is primarily how tankless water heaters are more energy efficient. When a hot water faucet is turned on, cold water flows through a heat exchanger in the unit, using a natural gas burner or an electric element to generate hot water instantly.

Diagram of the Chronomite instant-flow tankless water heater.
Chronomite Laboratories, Inc.

Before You Replace Your Water Heater

Consider some limitations and trade-offs before deciding if a tankless water heater is for you.

  • Energy savings: According to the U.S. Department of Energy, if your home uses 41 gallons or less of hot water daily, demand water heaters can be 24% to 34% more energy efficient than conventional storage tank water heaters. If you use considerably more water per day, like 86 gallons per day, you will still experience savings in energy, but exponentially less, like 8% to 14% energy efficiency.
  • Cost: Tankless water heaters are pricier than conventional storage water heaters. Still, tankless water heaters will typically last longer and have lower operating and energy costs, which could offset their higher purchase price.
  • Lifespan: Tankless water heaters tend to have a lifespan of about 20 years, while conventional storage water heaters last about 10 to 15 years.

The type you select is based upon your intended use—and your intended use will have even more to do with the cost of these units.

Considerations

The significant variables you need to consider when buying a tankless water heater include the GPM volume (gallons per minute) of water the unit is required to heat, the temperature of the cold water entering the unit, and the desired temperature of the hot water exiting the unit.

Temperature

The groundwater temperature and the temperature differential, or the amount of heat you need to generate to heat the water, affect the model you need.

Groundwater temperature: Before buying a tankless water heater, you must consider the groundwater temperature of your region. The colder the groundwater gets, the less hot water can be produced by a unit for a given GPM flow rate.

  • Example: A tankless water heater in Michigan needs to be 33 to 50 percent larger than in Florida to serve the same number and types of fixtures. The tankless Michigan heater has to work harder to warm the incoming cold water since the groundwater coming into the unit can be 30 degrees colder in Michigan (42 F) than in Florida (72 F).

Temperature rise: This is the difference between the temperature of the hot water exiting the heater and the cold water entering the unit.

  • Example: If you want a shower to reach 110 F and live in south Florida with groundwater at 72 F, you need a 38 F temperature rise (110-72=38). A tankless water heater is sized by rating its temperature rise at a given GPM. So, a unit could be rated at a 33 F temperature rise at 2.0 GPM. Based on the manufacturer's data, this unit could provide a 65 F temperature rise at 1.0 GPM.
Map of groundwater temperatures across the country.
Home-Cost.com

Flow Rate

Flow rate is another major consideration. The slower the water flows through the unit, the more the water can be heated.

The Federal Energy Policy Act of 1992 required all faucets and shower fixtures made in the United States to have a flow rate of no more than 2.2 GPM at 60 PSI. Often, you can get below 2.2 GPM with low-flow aerators, but before 1992, older fixtures used much more water than 2.2 GPM. To determine your required GPM, add up how many fixtures of what type you will have served by the tankless water heater.

Review these examples of different flow rates:

Older pre-1992 faucets and showerheads can require substantial water flow. So, to accurately size your water heater, you need to measure the water flow from your faucets and showerheads. You might also consider upgrading your flow rates to 1992 standards if you have older faucets.

Close-Up Of Water Dripping From Faucet In Bathroom Sink
Chu-Wen Wang / EyeEm / Getty Images

Size

You can determine the size of your tankless system once you know the required temperature rise (desired hot water temperature minus incoming groundwater temperature equals temperature rise) and all flow rates for all the faucets and showerheads to be heated by the unit that may be on at one time.

Example in a warmer climate:

  • Calculate flow rate: If you require 11 GPM to accommodate two showerheads (one ​pre-1992 at 4 GPM, one at 2.2 GPM), one bathroom faucet at 2.2 GPM, and the kitchen faucet at 2.2 GPM.
  • Determine temperature rise: If you live in southern Florida, you need a 38 F temperature rise. So, you need a whole-house unit capable of handling 11 GPM (4+2.2+2.2+2.2=11) at a 38 F rise.
  • Decide on system type and look at energy specifications: You want an electric model. You discover a 240-volt Tempra 29 model by Stiebel Eltron (for example) can produce about 5.5 GPM at a 38 F rise.
  • Determine what you need to heat your home: Based on the unit's specifications, you would need two units this size to meet the 11 GPM requirement.

If you live in the northern U.S.—your incoming groundwater will be much colder. It's probably at least 30 F colder, so you'll be looking for a unit that can handle a 68 F temperature rise. Once you require a bigger unit like that, you'll have to move up to a gas-or propane-fueled tankless heater.

Multiple Tankless Gas Hot Water Heaters
Multiple Tankless Gas Hot Water Heaters

Features

Tankless water heaters come in two designs: point-of-use and whole-house versions. In each category, there are both electric models and natural gas or propane models. Some tankless units are sized to heat a cup of tea, while others provide enough hot water for two or more bathrooms. Also, your region has much to do with how much hot water a tankless water heater can produce.

Space

Unlike water heaters with large tanks, tankless water heaters are much smaller. They can be mounted in many small spaces, including closets, under sinks, pantries, or storage areas. It's best to place the unit close to a water line, gas line, or electric panel.

They also need to be located in a spot that does not freeze, so they would not be advised for placement in an unheated garage or outdoors. They also need to be kept away from rain or splashed water.

Types of Tankless Water Heaters

Point-of-Use Tankless Water Heaters

The point-of-use tankless water heater is small and usually fits inside a sink cabinet or closet. They are typically dedicated-use heaters, meaning the unit serves one sink, faucet, shower, etc.

Point-of-use tankless water heaters are less expensive than whole-house units. They are good choices for some applications, such as when your standard water heater (with tank) is in good shape but does not have sufficient capacity to serve extra fixtures.

Examples of a whole-house and point-of-use tankless hot water heater.
Home-Cost.com

Whole-House Tankless Water Heaters

Whole-house units are much more expensive than point-of-use units. Whole-house units have higher GPM flow rate capacity and can handle the demand for more than one fixture at a time. For example, a unit may simultaneously run two shower fixtures or a dishwasher, kitchen sink, and bathroom hot water faucet. Remember, pre-1992 showerheads can use six times more water than a bathroom sink faucet.

The size and number of whole-house tankless water heaters you need will be primarily driven by flow rate, which is determined by the number and types of fixtures you may have run at once. You may need more than one whole house tankless water heater hooked up in parallel to meet your hot water demands, especially for simultaneous shower usage.

Example of an electric whole-house tankless hot water heater and its interior.
Stiebel Eltron

Electric

The heat exchanger can be an electric-resistance heating coil or a gas-fired burner. In an electric water heater, a metal heating element heats up when electricity passes through it, transferring heat to the water and heating it.

A drawback of electric systems is that electricity is more expensive to run than gas, although natural gas may not be widely available throughout the United States.

Gas

Gas units generally have more heating capacity, and larger whole-house units are typically gas-fired, using natural gas or propane. Gas-powered tankless units have a flow sensor that starts combustion. When the gas valves opens, gas enters the chamber ignited by a spark to produce flame, which heats the exchanger and, subsequently, the water. Unlike electric models, one drawback is that these systems require venting, according to the national gas regulations.

These systems come in condensing and non-condensing gas models. A condensing gas tankless model maximizes system energy by using a dual heat exchanger. Non-condensing models only have one heat exchanger. Condensing systems are more energy-efficient as less heat is lost when heating the water.

Solar

If you have a solar power system in your home, a tankless water heater can be connected to the home's solar energy system. Making the appropriate connections will cost an additional fee, but your unit will be powered by clean energy.

Cost

A tankless water heater costs $2,542 on average. Single-point heaters cost considerably less than whole-house heaters, while electric tankless heaters are also less expensive but can only heat a smaller volume of water efficiently.

According to Angi, units range from $1,394 to $3,806, with smaller electric tankless water heaters costing as low as $100 to $250. Several factors, such as the water heater's brand, type, and quality, impact your final price.

Installation should be done by a professional, such as a plumber, water heater installer, or HVAC expert. On average, experts charge about $50 to $200 per hour, depending on the project's scope and regional location. You can expect install costs to average between $600 and $1,850.

You may also qualify for tax credits when purchasing an ENERGY STAR-certified tankless water heater. The government also offers additional tax credits for solar-powered units. 

 Tankless Type  Smaller Unit  Larger Unit
 Single point of use  $100 to $300  —
 Whole house  —  $450-$1,500
 Gas  $500 to $1,200  $900 to $2,200
 Electric  $100 to $250  $420 to $800
 Solar  —  $1,000 to $6,000

How to Choose

When choosing between a conventional water heater and a tankless water heater, the most obvious difference will be upfront costs and what will be involved with the installation.

Are the Upfront Costs Worth It?

Tankless systems are more expensive at the onset—for the initial outlay for installation and the system. Gas and electric tankless water heaters run more efficiently than conventional water heaters of the same fuel type. They also last at least five years longer than traditional systems.

The average energy savings is at least $50 annually, usually more. The system and its installation will eventually pay for itself. And ultimately, it's a better choice for the environment.

However, these benefits may not outweigh the cost of switching your home to a tankless system. It would require retrofitting the home to accommodate the new system, which is expensive. This revision might also require upgrading the home's electrical system and gas lines to increase its use. Considering all the costs, it might render a tankless upgrade a cost-prohibitive proposition.

Gas vs. Electric Tankless System

Gas systems are considered a better choice for homes in colder regions. They are also recommended for larger homes with heavier hot water utilization. Using gas power tends to be less expensive than electric power as well. However, these systems require venting, which you do not need to consider with an electric system.

Electric systems are generally less expensive and are best suited for lower volume or as a supplemental system. Electric tankless units are a good option for warmer climates.

Conventional Water Heater vs. Tankless Water Heater

Conventional water storage tanks range from 30 to 60 gallons, with an average size of 50 gallons, roughly taking up a space at least 6 feet by 2 feet. Conventional systems cost considerably less ($600 to $2,500) than tankless systems that heat the same amount of water. Most homes already have water heater systems with tanks, so installation costs are much less for replacing a tanked water heater.

Replacing a home's water heating system with a tankless water heater makes the most sense when building new construction or considering a significant home renovation project. A tankless water heating system should also become a viable consideration if a conventional water heating system no longer meets the hot water needs of your home.

Conventional Water Heater
  • Least expensive option

  • Installation is less expensive

  • Constantly expends energy to heat large storage tank

  • Takes up a lot of space

  • Less environment-friendly

  • Lifespan is about 10 to 15 years

Tankless Water Heater
  • Comparitively expensive

  • Pricier to install

  • Saves money in energy expenditure

  • Small, space-saving option

  • Eco-conscious choice

  • Lifespan is 20 years

Where to Shop

Buying In-Store

Going into a store or showroom to buy a tankless system lets you talk to a salesperson about the unit's space needs, warranty, and installation. Also, you might be able to negotiate the installation costs if you go to the store. Typical places to buy tankless systems include big box home improvement stores and water heater specialists.

Whichever unit you select, ensure you get a long warranty with the option for an extended warranty. For example, one company (Noritz) offers a 25-year warranty for its tankless system. Read the fine print in the contract since certain circumstances, like commercial use, can reduce the warranty time.

Buying Online

When buying online, the major disadvantage is that it is more difficult (although not impossible) to talk to a representative about the warranty, delivery, details about the unit, and other options. Online shopping allows you to comparison shop for the best prices among many retailers from the comfort of your home. Online buying is the most time-efficient option for when you know exactly what you want.

Where to Buy

There are plenty of manufacturers from which to consider your new tankless water heater. The following are some of the manufacturers to check out:

  • AO Smith
  • Bosch USA
  • Bradford White Corp.
  • Chronomite Laboratories Inc.
  • Eemax, Inc.
  • Noritz America Corp.
  • Paloma Industries
  • Rheem Manufacturing
  • Stiebel Eltron USA
  • Takagi Industrial Co.
FAQ
  • Can you run out of hot water using a tankless system?

    You will always have hot water if you have a tankless water system sized appropriately for your house's needs and a power source (gas, electric, or solar) running to the system.

  • How long do tankless water heater systems last?

    On average, a tankless system lasts 15 to 20 years, with some running up to 25 years or more. Comparatively, a conventional hot water system lasts, on average, 10 to 15 years.

  • What type of maintenance does a tankless water heater need?

    Similar to maintenance for a tanked water heater, a tankless water heater must be flushed once a year. If your area has hard water, consider cleaning it every six months to remove a potential buildup of mineral deposits.

The Spruce uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Tankless or demand-type water heaters. U.S. Department of Energy.

  2. How much does a tankless water heater cost. Angi.