How to Decide if a Tankless Water Heater is Best for You

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Heating our water comprises 25-30% of energy costs in our home. Many of the tankless water heater manufacturers are advertising a 50% reduction in your utility bill.


We completed construction of our new home in March. We researched these heaters in depth and will share our findings with you here so you can decide if a tankless hot water heater is the best choice for you.

  • Decide how the tankless hot water heater will be installed in your home. Most of these tankless hot water heaters are natural gas or propane fired. They will need to be vented to the exterior of your home. In some cases the water heater can be installed outside. Consider if your home has proper through wall access to vent the exhaust. If you are already using a gas fueled tank water heater, then this should not be much of an issue.

  • It will benefit you to understand how the tankless hot water heater operates. They employ high powered burners to rapidly heat the water as it flows through the heat exchanger. When the water is cut off, the burner cuts off. See the attached illustration for a detailed explanation of how a tankless hot water heater works.

  • When using a tankless hot water heater, we found the quality of the hot water coming from the tap to be an improvement but not quite as extraordinary as advertised. The people we spoke with often cited inconsistent water temperatures. Furthermore, if you are just using a light flow of hot water, the computer may not sense the need to ignite the burners.

    This is similar to how a full sized tank hot water heater responds. It will still take time for the water to heat. However, you will see an improvement over the old style tank heaters. The bottom line is that while there is an improvement in performance, the hot water isn't quite as instantaneous as advertised.

  • Evaluate the cost of the tankless hot water heater. The initial cost of tankless water heaters will be double the cost of a traditional water heater.

  • Maintenance costs will be higher. Depending on your water type, it may not be advisable to use a tankless water heater. It is advisable to have the unit serviced every year. The service call will involve flushing the system with vinegar and a possible valve replacement. Costs could exceed $250 per year. If you have well water, the minerals and calcium in the water can restrict water flow.

  • Studies have shown that tankless hot water heaters are approximately 25% more efficient than tank heaters. That will translate into a $80-90 savings per year. At that rate it may take you up to 20 years to break even. However, energy costs are going to continue to rise. You must factor that into deciding if a tankless hot water heater is best for you.

    Also there are tax breaks available for certain types of energy efficient upgrades to your home. Check with your CPA, maybe the tax break will close the gap.

    In the end, we went traditional. The decision was based on the concerns over our well water. If that issue is resolved by design improvements, we very likely will make the switch.

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