Not all tankless water heaters are created alike. Some will save you money (and ensure you a piping hot shower when your aching muscles need it most) while others will do the opposite. How can you find the best tankless water heater for cheap?

This article will give you all the information you need to consider before making a purchase. You'll learn what factors need to be taken into account, and how to match your needs with the models in the marketplace today.

Why Get a Tankless Water Heater?

Your old hot water heater may not be the greatest. Running out of hot water in the bath or shower is often a person's first wake-up call to the realization that they may need to find a new solution for hot water in their home. Tankless hot water heaters are often a great alternative to traditional water heating methods in your residence.

How a Tankless Water Heater Works

You may hear tankless hot water heaters called "on demand hot water heaters." This gives you a pretty good hint as to how they work. Typically, tankless hot water heaters will not store the hot water. Instead, they create hot water "on demand" - as much as you need, when you need it.

Now you understand that tankless water heaters directly heat your water on demand. What does this mean in terms of how it affects your day to day hot water experience? Well, unlike your traditional hot water heater that has a storage tank, these tankless water heaters don't have any water sitting in a tank losing heat.

Heaters with storage tanks experience what is known as standby heat loss. Standby heat loss refers to the heat lost by hot water that is stored in a tank and therefore is cooling down. This is a huge waste of energy and is the biggest problem with the traditional hot water heaters that have tanks.

Tankless water heaters are known for being energy efficient because they avoid this whole standby heat loss probem.

How they work: cold water enters the tankless water heater. A flow activated switch turns on a heating element, and the cold water is then heated. The heating element, also known as a heat exchanger, can be made of various materials depending on the exact type of unit you have.

For example, you may choose a tankless water heater that uses electric resistance heating coils. Or you could go for one that has a gas fired burner. The type of heat exchanger affects the heating capacity so this is something you should consider when comparing various models.

What to Consider When Buying Your Tankless Water Heater

  1. Volume of water the unit will be required to heat
  2. How cold the water entering the unit will be
  3. How hot you want your hot water to be

These three factors determine the type and size of the best tankless water heater for your home.

Which Type of Tankless Water Heater to Use

We can think about tankless water heater as coming in two basic types. The two basic types are:

  1. Point of Use
  2. Whole House

Which type is best for you? That depends on how you intend to use it and how much money you are willing to spend.

Let's examine each of these types of tankless water heater in detail. First we'll look at the Point of Use tankless water heater.

1. Point of Use Tankless Water Heater

Point of use tankless water heaters are quite small. They typically can fit inside a sink cabinet in your kitchen, or inside a closet. These are meant to be dedicated use water heaters. Rather than heating water for your entire house, a point of use tankless water heater will heat water for a single sink, shower, or other area where hot water is needed quickly.

Point of use tankless water heaters are much cheaper than whole house units. You can expect to pay only a few hundred dollars for a good point of use tankless water heater.

2. Whole House Tankless Water Heater

Whole house Tankless Water Heaters boast higher capacity and are meant to supply hot water to multiple fixtures. Keep in mind that different fixtures use differing amounts of water. A whole house Tankless Water Heater may not actually heat water for your whole house if you have a very big house with many fixtures, all using a lot of hot water. It just depends on the actual capacity that is required.

You could have a whole house Tankless Water Heater that creates hot water for two showers, and another one that gives hot water to your dishwasher, kitchen sink and laundry room. So don't think of it in terms of every house being the same, but really work out exactly how much hot water you will need, or in other words the volume of water that your unit will need to heat.

What types of fixtures use the most hot water? If you guessed showers, you're correct. A home where a few people take simultaneous showers on a regular basis may need more than one whole house tankless water heater.

As you can imagine, whole house tankless water heaters are considerably more expensive than the point of use units. You will be looking at paying several hundred to several thousand dollars. Yes, there is a pretty big range in price - it depends on the factors we've already talked about. And a whole house heater can save you thousands of dollars in heating, so it is money well-spent.

How Groundwater Temperature Affects Tankless Water Heater Size

The temperature of the groundwater is not something you can control. It is determined by your geographical location.

If you live in a place with colder groundwater, your tankless water heater must do more work to warm the incoming cold water, as compared to someone who lives in a place with warmer groundwater.

How Hot Do You Want Your Hot Water to Get?

Hot water exits the water heater and cold water enters it. The difference in temperature between your cold water (the groundwater) and the hot water is called temperature rise.

So if you want a shower that can be as hot as 115°F but your groundwater where you live is 70°F, then you are looking at an overall 45°F temperature rise (115-70=38).

How are tankless water heaters sized? Their temperature rise are rated by GPM - Gallons Per Minute.

The more slowly water flows through the unit, the more the cold water can be raised in temperature.

Measuring Flow Rate

So how do you know what GPM you require? It's pretty straightforward: just count up how many hot water fixtures you have in your home, and also what type they are. Then measure the actual water flow from each water fixture.

Choosing the Best Tankless Water Heater For You

Once you have added up the required flow rates for all the fixtures to be heated by your tankless water heater, you will know what GPM you need. Then just limit your search to tankless water heaters that can provide that GPM at the temperature rise that you worked out previously (remember, the temperature rise is just the desired hot water temperature minus the groundwater temperature).

You may find that you need two whole house tankless water heater units or even more to meet your GPM requirements. Or you may find that it is more cost effective to purchase one or more point of use tankless water heaters. Know your options and you can save money on your tankless water heater, whatever model you choose!

If you find you need a really large tankless water heater, you'll probably need to find a good gas or propane fueled tankless water heater to heat the water for your whole house.

A Tankless Water Heater Can Give You a Tax Break

Nobody likes paying more taxes than they need to, right? Well, installing a tankless hot water heater can actually save you money on your taxes this year. You may be able to qualify for a $300 federal energy tax credit! What a great incentive to buy a good tankless water heater before April 15.