Tankless Water Heater Pros and Cons to Help You Decide If It’s Worth The Cost

Tony Carrick
Written by Tony Carrick
Updated May 16, 2023
Modern brick style shower running hot water
Photo: champlifezy@gmail.com / iStock / Getty Images Plus


  • Tankless water heaters are energy efficient.

  • They’re twice the cost of tank water heaters.

  • The complexity of installation impacts cost.

  • Tankless water heaters have a limited flow rate.

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Tankless water heaters have gained popularity in recent years, and for good reason. As an alternative to the traditional hot water heater, tankless systems provide greater energy efficiency and faster, on-demand heating. Plus, their compact size is a major selling point, especially if you’ve officially run out of storage space (looking at you, 9’ tall Christmas tree). But tankless water heaters aren’t without their drawbacks, including higher up-front costs and sometimes complicated installation.

What Is a Tankless Water Heater?

Tank versus tankless water heaters, with tank-style constantly running and less energy efficient

True to its name, this type of water heater warms water in your home for sinks and baths without needing the large tank that a traditional water heater uses. Instead of having a supply of warm water on hand when someone opens a hot water tap, a tankless water heater instantly heats the water when the tap opens. 

When cold water flows into the tankless water heater, a heat exchanger powered by either an electric heating element or a gas burner instantly heats the water. While this technology makes them more efficient than their tank water heater cousins, tankless water heaters also come with a steep price tag. As such, you’ll need to weigh the energy savings they offer with their upfront cost to determine if they make sense for you. 

Benefits of Tankless Water Heaters

Tankless water heaters offer a number of benefits over traditional hot water heaters.

Energy Efficiency

One of the biggest pros of tankless heaters is that they heat the water pretty much on demand, meaning that you’re only heating the water when you need it. In a traditional hot water heater, the tank storing your water is constantly being heated, which can drive up energy consumption (not to mention sticking you with rusty and discolored water when your tank begins to age and fail).

Saves Money

Tankless water heaters are an energy-efficient alternative to traditional tank water heaters. Tank water heaters must keep 50 to 80 gallons of water warm at all times, so it’s ready when someone steps into the shower or drops a load of whites in the washing machine. Since tank water heaters experience heat loss through their walls, they’re constantly using either a gas burner or electric heating element to keep the water in the tank hot. 

Tankless water heaters, in comparison, only heat water when you open a hot water tap and thus don’t use any energy when there’s no hot water running in the home. As a result, these on-demand heaters can be as much as 8%-34% more efficient than traditional tank water heaters, according to the Department of Energy. Just how efficient a tankless water heater is and how much it will reduce your energy costs depends on your household’s usage patterns and the tankless heater’s efficiency rating. 

Hot Water On-Demand

Fans of tankless systems claim that tankless heaters heat water faster than traditional ones. In a traditional tank system, you can find yourself waiting for the tank to refill and the water to warm, especially if you’ve just used the dishwasher or completed a load of laundry. The pressure sensors activate the heating coils, meaning that the water is heated on demand, as you use it. That means no more jockeying to be the first in the shower in the morning—go ahead, hit that snooze button.

Compact Size

Another perk of going tankless is the relatively compact footprint of these systems. Even whole-house tankless systems are only about the size of a large suitcase, meaning they’re often much smaller than traditional hot water heater tanks. This not only can allow you to save space in your basement or laundry room, but it also gives you more options for installing your tankless heater elsewhere in your home. For instance, installing the heater near an access point, such as in a bathroom or kitchen, can make for faster, better, and more efficient heating. Plus, it’s easier to routinely visually inspect your tankless heater if you’re not having to climb over mountains of boxes and peer around gas and supply lines just to make sure all systems are go.

Disadvantages of Tankless Water Heaters

While there are a lot of benefits to tankless water heaters, there are also some drawbacks and tankless water heater problems you can encounter.

Premium Costs

While tankless heaters can produce big savings in your home energy costs, the up-front costs of a tankless system can be significant. High-end tankless models can cost twice as much as conventional water heater prices. Installing a tankless water heater isn’t generally something you want to try to do yourself unless you have experience. So you’ll need to factor in the cost of the system and labor. 

This means that the average costs to install a tankless system can range anywhere from $270 at the lowest end to more than $6,000 if you end up having to retrofit your entire plumbing system. For instance, installing a tankless water heater might mean you’ll also need to install new pressure regulators and termination vents to keep the hot water flowing strongly and safely.

Additional Installation Work

In most cases, installing a tankless water heater involves more than just swapping out the new system for the old. Because it’s a relatively new technology, the odds are you’re going to need to have some retrofitting done to your plumbing system to get the new heater running safely and well. This could include, among other things, new pipes, vents, and fittings. In addition, you may also need a permit and/or a safety inspection depending on where you live.

Not-So-Instantaneous Heating

One of the biggest selling points of tankless heaters is that they provide hot water almost instantly, no matter how much hot water has just been used. But the truth is that the “instant” tankless water heater is not always so instantaneous. In fact, you might not notice much difference, if any, between the tankless and the standard hot water heater when it comes to getting, or keeping hot water.

There are lots of factors that can affect how long it takes for the water to get hot or how much you can use before running out. The kind of tankless water heater you choose and the distance from the heater to the faucet, for instance, will determine how long it takes to get the water hot.

Limited flow rate

Tankless water heaters may have a never-ending hot water supply, but there are limits on the amount of water that can flow through them. Tankless hot water heaters can typically produce 2 to 5 gallons of hot water per minute, depending on whether you have a gas or electric water heater. While that’s plenty of hot water for a shower, doing the dishes, or washing your whites, it isn’t enough if you’re doing all of those things simultaneously. 

If you attempt to run your washing machine and shower at once, the hot water may fluctuate as the tankless water heater struggles to keep up with demand. 

Are Tankless Water Heaters Worth It?

There are both pros and cons to tankless water heaters. Understanding these systems’ benefits and drawbacks will help you determine whether a tankless system or a conventional hot water heater is right for your home. 

While you’ll get a more efficient water heater with a tankless model, keep in mind that it costs about twice as much to install a tankless heater as it does to install a tank water heater. Given that price difference, it could take many years to make up that cost difference in energy savings.

You should also consider the capacity of a tankless heater. Since most tankless systems can produce between two and five gallons of hot water per minute, a tankless system may struggle to keep up with demand if you have a large household. Talk to a water heater installer near you to help you decide if a tankless water heater is worth it for your home.

Frequently Asked Questions

Tankless water heaters won’t increase your electric bill. Since tankless water heaters are more efficient than tank water heaters, installing one in your home will actually allow you to save money on your electric bill. The Department of Energy estimates you can save $100 or more each year with a high efficiency tankless water heater.

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