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What is a Tankless Water Heater?

If you are thinking of improving the water heating system of your home and considering tankless water heaters, here is everything you need to know so you can make an informed decision.

This is a close look at the showerhead of a bathroom with an electric heater on the side.

You’re used to it, so you probably don’t ever even think about it. But it’s actually really amazing that you can go into any faucet in your home and turn a certain knob to make hot water come out of it. This is truly a marvel of modern engineering. Tankless water heaters are even more amazing because these bad boys heat up your water without even storing it first.

But does this modern marvel of engineering belong in your home? Is a tankless water heater going to work for your daily needs? How the heck does these things work, anyway? Get the answers and you’ll know how to answer the main question: should you get a tankless water heater?

How Do Tankless Water Heaters Work?

Tankless water heaters are also called instant water heaters because they are. They heat the water the instant you need it, heating it up before it comes out of the faucet. This is a very different design from more traditional water heaters, which are made with a large storage tank where the water is held and heated so that it can then be delivered to you.

This huge tank is always full of water because new water is piped in as water comes out of the heater and flows out of your faucet. These standard water heaters typically store 20 to 30 gallons of water in the small sizes, 40 to 55 gallons in larger sizes, and more than 55 gallons in commercial and industrial sizes.

So when you can turn on a faucet and have hot water come out right away but there’s no large tank of water anywhere in your house, it does seem pretty magical. What actually happens is that tankless water heaters heat the water on demand.

A person adjusting the temperature of the water heater.

When the faucet is open, the tankless water heater kicks into action and begins heating the water immediately. Rather than storing hot water in a huge tank, it simply creates water as it’s needed. As you might imagine, this is more energy-efficient than storing hot water constantly.

It’s a simple but ingenious design. Basically, when the faucet is turned on the water rushes through the pipe. The water is quickly routed through the tankless water heater, where a gas burner or an electric heating element immediately heats the water as it flows past. By the time it gets to you, the water is nice and hot.

Installing a Tankless Water Heater

Because there is no tank, it may seem that a tankless water heater should be easier to install than the more traditional type of water heater. However, it’s actually more difficult to properly install a tankless water heater. This is a complicated piece of equipment and it’s still a water heater, so there are strict code requirements that must be followed in order to properly install this device.

Even tankless water heaters must be properly vented. Only a plumber can install these water heaters correctly. Tankless water heaters must also be connected to water lines. And depending on whether the water heater uses gas or electricity to heat the water, the water heater must be connected to the gas line or must have access to electricity. There are a lot of moving parts to this installation and a lot of materials required, so expect to pay hundreds of dollars and wait for several hours while this process plays out.

A close look at the shower set of the bathroom with an electric heater on the side.

Tankless water heaters do cost more than traditional water heaters because they are more complex, though they don’t have a storage tank. However, tankless water heaters do last longer, on average, than traditional water heaters and they are far cheaper to operate. It takes less energy to heat water on demand than it does to store it all the time, 24 hours a day. Tankless water heaters can continue to function well for over 20 years, which is about double the lifespan of a more traditional water heater.

A tankless water heater will use 30 to 50 percent less energy than traditional water heaters, which is huge energy savings. That adds up to very real savings on your utility bill, so a tankless water heater will more than pay for itself in time.

Why Go Tankless?

There’s a big benefit to choosing a tankless water heater: space! Because you don’t have a huge 30- to 55-gallon water tank inside your house, you have more room in the spot where that large water heater would normally be. If your climate and local plumbing codes permit it, you can even have your tankless water heater installed outside your home. You won’t do any better than that when it comes to saving space.

Don’t overlook the fact that tankless water heaters are actually much safer. It is very rare that something goes fatally wrong with standard water heaters, but it can happen. Standard water heaters can malfunction in such a way that the tank fills up with pressure and turns into a veritable rocket that, yes, has enough force to do considerable damage and enough force to take a human life. Again, this is rare…but rare isn’t the same as never. This is a scenario that cannot possibly play out with a tankless water heater design.

A tankless water heater also cannot spring a leak, something that happens with standard water heaters on a pretty common basis. Water heater tanks are made from metal, which will rust over time. And sometimes, that rust will create a hole in the tank that allows all the water inside the water heater to leak out all over your home.

Why Not Go Tankless?

One of the major problems with a tankless water heater is only an issue if your water heater is strictly electric. While this is great for energy-efficiency, it’s not so great when the power goes out. You have no hot water stored and you have no power…so you have no hot water. When there is a power outage, the only access to hot water you’ll have is whatever you heat up on your own.

Tankless water heaters do not heat water at an extremely fast rate. Your hot water will come out of the faucet noticeably slower than it would come out with a standard water heater that has a storage tank. Hot water comes out at a rate of two to five gallons per minute with a tankless water heater system. Tankless water heaters that use gas to heat water are faster than those that use electricity, but this is still slower than more conventional water heaters.

A white-tiled bathroom with a white electric heater beside the telephone shower.

Unlike more traditional water heaters, tankless water heaters are not very effective at providing hot water in two places at the same time. Because water is somewhat slow to come out of a tankless water heater, comparatively speaking, running the dishwasher and taking a shower at the same time will really push a tankless water heater to its limits. You can install two tankless water heaters and connect them to each other via pipes in order to double the water-heating power in your home.

Tankless water heaters cost quite a bit more than standard designs, to the tune of about three to four times more. This is a big initial expense that comes in addition to all the installation costs, which is also considerable. You will pay a great deal of money to have a tankless water heater installed, as opposed to a more traditional design, but this will last longer and be far cheaper to operate in the long run.

Should You Get a Tankless Water Heater?

Is a tankless water heater right for your home? The expense of installing the water heater will pay for itself in utility bills, in lifespan, and in the space you save. However, you may have trouble keeping the hot water flowing if you have many people in the household using hot water at the same time. Adding a second tankless water heater will double your water capacity but will also nearly double your initial cost. Tankless designs are safer and ultimately, they are cheaper. Look at all the factors of having a tankless water heater and decide what’s best for your home based on all your knowledge of this remarkable device.

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Written by KC Morgan

KC Morgan has been a professional freelance writer since 2006. Over the last decade, KC has published thousands of articles and blog posts that have been read by millions. A DIYer in her free time, KC has written hundreds of how-tos, guides and tutorials for different DIY and improvement projects around the house.
KC’s articles have appeared in “Popular Mechanics,” and have been featured on Bob Vila’s website. KC has written in-depth DIY articles for Sears.com and Overstock.com, as well as dozens of other websites. When she’s not writing or DIYing, KC enjoys watching college basketball, playing with her cats and experimenting with new cupcake recipes. Follow KC on Twitter @KCMorganWrites.