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Is tankless hot water right for you? Comparing pros and cons

Last updated 1/21/2020

Tankless water heaters can be a great way to reduce your home energy costs and heat your water in a more environmentally-friendly way; however, they aren’t suitable for every property. Before going through with replacing your water heater, it’s important to understand the pros and cons of instant hot water to determine if this technology is right for you.

pros and cons of tankless hot water

Factors to consider before installing an on-demand hot water system

Many property owners can benefit from tankless hot water, but it’s important to understand what makes a property more or less suitable for installation prior to signing an installation contract. Water usage patterns, environmental factors, and your current home’s wiring and piping setup can all help determine whether it’s worth it to buy a tankless hot water system for your property.

Hot water use patterns

A primary consideration when comparing on-demand hot water with traditional storage tank hot water setups is your water use. Specifically, tankless water heaters need to be sized based on how much hot water you use at any one given time. In some cases, tankless may not be able to provide enough hot water to sufficiently cover all of your usage at once, unless you install a point-of-use system for each faucet.

Most on-demand water heaters provide water in the range of one to five gallons per minute (GPM). For reference, a high-flow showerhead might have a flow rate of 2.5 GPM, and a washing machine can go up to 3 GPM. If you plan on spreading out your hot water usage throughout the day, a whole-house tankless hot water system might be right for you. Alternatively, if you expect peaks in hot water usage, you may need to install several point-of-use systems or stick with a traditional storage tank to avoid running out of hot water suddenly.

You can determine the GPM flow of the faucets on your property by checking either the label on the product or the manufacturer’s website.


On-demand hot water setups work just about anywhere, but they often take longer to heat water to your desired temperature in colder climates, such as in the Northeast. This is because groundwater in northern regions of the U.S. drops to much colder temperatures in the winter than groundwater in more southern locations, and your tankless water heater will need to work harder to increase the temperature of that water to your desired temperature. The temperature difference between cold water entering your unit and the desired hot water temperature as it exits is called temperature rise. For example, if water comes into your system at 65°F and you want to heat it to 95°F, you need a temperature rise of 30°F. 

Importantly, the larger the temperature rise, the more energy you need to heat your water. Given that electric tankless water heaters warm water more slowly than gas-powered units, properties in the Northeast may benefit more from either a larger, more powerful system, or a gas setup as opposed to an electric one.

Current water heater

Another factor to consider before going tankless is the setup of your current water heater. Upfront installation costs can quickly rise if you need to pay electricians, plumbers, or other contractors to set up proper electrical systems, gas lines, and water lines. Be sure to look carefully at any estimate you get from an installer when considering tankless hot water to understand any additional upgrades your home needs in order to make the system work.

Pros and cons of on-demand hot water

As with any important energy decision, there are a number of pros and cons to consider when examining your tankless water heater options. Here are some top ones to keep in mind:

Pros of tankless water heaters Cons of tankless water heaters
High efficiency Limited flow rate
Long-term savings High upfront cost
Environmentally friendly Can require prior setup work

Advantages of on-demand hot water

Here are some of the top advantages of installing tankless hot water:

High efficiency

Tankless water heaters are generally more energy-efficient than traditional storage tank options: according to the Department of Energy, on-demand heaters can be between 8 percent and 50 percent more efficient. This is primarily because a tankless water system eliminates the need for a large storage tank, which is susceptible to standby energy losses (i.e. losses of heat from the water over time as it sits unused in your tank).

Where your own water heater setup falls on that efficiency range depends on a number of factors, including usage patterns and system type. For example, using point-of-use tankless water heaters conserves more energy than using a whole-house system.

Long-term savings

Depending on the type of tankless water system you install and the extent to which you need to prepare your home’s wiring, water lines, and gas lines, on-demand hot water systems generally help you save money on your water heating costs over the lifetime of the system. Although upfront costs can be high, tankless heaters last longer than conventional water storage heaters, and most property owners can expect a payback period between 10 and 25 years. In general, electric tankless models have faster payback periods than gas tankless models.

Environmentally friendly

Tankless water heaters are more efficient than storage setups, meaning they use less fuel to heat the same amount of water. While traditional storage tank options have efficiencies between 40 percent and 60 percent, efficiencies of tankless heaters can range between 80 percent and 99 percent. This means tankless systems can convert one unit of fuel to almost one whole unit of heat. Lowering your fuel usage helps reduce your environmental footprint, making tankless hot water heaters a more environmentally-friendly water heating option.

Disadvantages of on-demand hot water

Here are some disadvantages of installing a tankless water heater to keep in mind as you’re evaluating your heating and cooling options:

Limited flow rate

If you plan on running many appliances that use hot water simultaneously, you’ll be hard-pressed to keep everything hot with one central whole-house tankless water heater. For properties that use more than 40 or so gallons of hot water per day, you’ll either need to install a few point-of-use systems or stick to a storage tank heater.

High upfront cost

From a financial perspective, a tankless water heater requires a larger investment upfront than traditional storage tank heaters. An on-demand water heater may initially cost up to three times as much as a tank water heater.

May require significant setup work

In addition to the high upfront cost of tankless hot water equipment, you might need to invest additional money into upgrading and/or expanding your water pipes, gas pipes (for gas units), and electrical wiring in your home to support a tankless system. This may involve hiring plumbers or electricians to properly set you up to go tankless, which can add onto the upfront cost.

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