What Is a Tankless Water Heater & How Does it Work?

April 26, 2023

As a homeowner, you’re probably looking for ways to save money on your energy bills and make your home more efficient. And, as you may have heard, a tankless water heater is one of the best ways to do so.

So what is a tankless water heater? And how does a tankless water heater work? Check out our complete guide to learn everything you need to know about tankless water heater benefits, cost, and more.

What Is a Tankless Water Heater?

Tankless water heaters, also known as on-demand water heaters, are an innovative type of water heater that produces hot water for your sink, washing machine, dishwasher, shower, and more. Water is heated only when needed, rather than being heated continuously like a standard tanked water heater—even if hot water is not needed.

As the name suggests, tankless water heaters do not store hot water in a storage tank. Instead, water is heated as it passes through the water heater unit. The units are much smaller than traditional water heaters and can be mounted to the wall.

How Does a Tankless Water Heater Work?

Typical water heaters use some type of fuel or electricity to heat water in a tank. However, tankless water heaters do away with the storage tank by using a heat exchanger to raise the temperature of the water as it runs through the heater. Depending on the device, the heat exchanger may be powered by propane, natural gas, or electricity.

Here’s a breakdown of how the process works:

  • A flame or electrical power heats two exchangers. 
  • Water starts to heat up as it passes through the secondary exchanger.
  • Water keeps rising in temperature as it passes through the main exchanger.
  • Water leaves the heater and moves through the pipes to the sink, shower, etc.
  • The flame adjusts to maintain the temperature while water is turned on.
  • The water stops flowing, and the flame turns off when the user is done.

Tankless Water Heater Features

Tankless water heaters can be powered by electricity, propane, or natural gas. Tanks are compact and can be stored in a variety of locations in the home. Many tankless water heaters are even Wi-Fi compatible so that they can be controlled remotely via smartphone or other mobile devices.

Condensing vs. Non-Condensing Water Heaters 

Some tankless water heaters are condensing, while others are non-condensing. Condensing water heaters have two heat exchangers, making them more energy-efficient. Condensation drains from the bottom of this type of heater, ideal for cooler regions with low groundwater temperatures.

Non-condensing water heaters have just one heat exchanger and ventilate exhaust gas from the top of the heater. These tanks are easy to maintain and do not require the draining of condensation. They’re considered ideal for warmer climates where groundwater is at a higher base temperature.

Benefits of a Tankless Water Heater

An increasing number of homeowners are making the switch from storage tank water heaters to tankless water heaters, and it’s easy to see why. Tankless water heaters offer a host of benefits, including:

1. Versatility

Most traditional storage-tank water heaters come in one large, standard size and shape, meaning they must be stored in garages or basements in most homes. However, tankless water heaters are compact enough to be stored just about anywhere, from laundry rooms to kitchen cabinets.

2. Unlimited Hot Water

Perhaps the greatest benefit of tankless water heaters is that they offer unlimited hot water. While storage tank water heaters offer a limited supply of hot water at any given time, tankless water heaters provide hot water on demand and continuously, meaning homeowners never have to worry about conserving hot water during showers, baths, etc.

3. Increased Storage

Tankless water heaters are less than half the size of storage tank water heaters, meaning homeowners can save on precious storage space in the garage, basement, and beyond. The small size means water heaters can be stored wherever makes the most sense for the homeowner.

4. Remote Accessibility

Tankless water heaters are often Wi-Fi capable by using the latest smart technology. This allows homeowners to schedule and monitor their water heater from a smartphone or other mobile device—even when away from home.

5. Greater Durability

The typical storage water heater should be replaced every ten years and may require costly maintenance before needing replacement. However, tankless water heaters last about twice as long as storage tank water heaters, and repairs are usually far more cost-effective.

6. Increased Energy Efficiency

Because they only heat water as needed, tankless water heaters are rated as highly efficient when rated according to a Uniform Energy Factor. This offers increased energy efficiency, which is better for the environment and can reduce energy bills.

7. Convenience

Tankless water heaters provide limitless hot water, can be stored in compact spaces, and are cheaper to repair. All of these benefits add up to greater convenience and practicality for any homeowner looking to save money, protect the planet, and enjoy hot water on demand.

Cost of a Tankless Water Heater

Now that you’ve learned more about how a tankless water heater works and the benefits of this type of water heater, you’re probably wondering: How much is a tankless water heater?

The cost of purchasing a tankless water heater varies depending on the location, brand, and type of water heater. Electric tankless water heaters are typically less expensive, while solar tankless water heaters cost more.

Learn More About Tankless Water Heaters Today

If you’re interested in learning more about tankless water heaters, contact us today. Yes! is your reliable source for any HVAC maintenance, repair, or replacement needs. From tankless water heaters to water softeners, we’re ready to help make your home a more comfortable and efficient place to be. Get in touch to schedule tankless water heater installation or get a free second opinion from one of our skilled technicians.


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Last Updated: May 25, 2023