Tankless Water Heater Buyer Guide – Updated for 2025

✔ Expert-reviewed for accuracy and completeness.

Did you know that over 17% of your home’s energy expenses are going to heat your water? This is a considerable chunk of change and one you may want to consider more closely if your water heater is over a decade old.

Whether you’re looking to upgrade an older tankless water heater or switch from a storage system to tankless, this tankless water heater buying guide will help you decide which make, model, and style is right for you.

We’ll go over important things like sizing, fuel sources, the benefits of tankless, how to compare efficiency, common warranty terms, potential rebates, and things you have to consider before settling on the right make and model for your home.

What Is a Tankless Water Heater?

Traditional tank hot water heaters keep a large volume of water heated constantly so that it is available as needed. Tankless water heaters, on the other hand, heat the water on-demand.

In other words, tankless water heaters generate hot water as needed whenever you turn on a hot tap in your house, be that a shower, a kitchen faucet, a utility room tap, or when you run the dishwasher or washing machine.

Moreover, this type of water heater can be more efficient and can also provide virtually limitless hot water, unlike a storage system, which may temporarily run out when your home’s water demands are high (like taking a really long shower).

How Does a Tankless Water Heater Work?

A tankless water heater provides domestic hot water on-demand when you request hot water from a tap or appliance.

Because they only heat water as needed, there’s no storage tank for hot water. As such, these systems are smaller and more efficient than tank water heaters. Here’s a rundown of how they work:

• When you turn on a hot water tap (sink, shower, etc.) or appliance (like a washing machine), cold water enters the tankless unit
• A gas burner or electric heating element heats the water as it flows through the unit
• The system adjusts the heating intensity based on the water flow rate and temperature setting
• The heated water exits the unit and flows to your faucet, shower, or appliance
• When you turn off the tap or the appliance completes its cycle, the system shuts down to conserve energy

Types of Tankless Water Heaters  

You can categorize types of tankless water heaters based on what fuel they use, how many heat exchangers they have, the installation location, and whether they provide hot water for the whole house:

Gas and Electric: A tankless water heater can be powered by natural gas or electricity. Gas water heaters tend to have higher flow rates, heat up faster, and are cheaper to operate. By contrast, electric ones are more efficient, require less space, have easier installation and maintenance, and are better for the environment if your electricity source is renewable.

Condensing and Non-Condensing: A non-condensing water heater is a standard water heater with only one heat exchanger. Condensing water heaters have two heat exchangers, where the second one captures and reuses heat from exhaust gases, reducing energy waste and producing more hot water with the same amount of fuel.

Indoor and Outdoor: An indoor tankless water heater is installed inside your home, like any other water heater. But there are also outdoor tankless water heaters that are installed outside, eliminating the need for ventilation and saving indoor space. However, they can be affected by rain, wind, and extreme temperatures and are only suitable for warm climates.

Whole-Home and Point-of-Use: A whole-home tankless water heater provides all the domestic hot water you need in the house, including for bathrooms, kitchens, utility rooms, and appliances. A point-of-use tankless water heater provides hot water for a single fixture (such as a hot tub or bathroom in a home addition) above and beyond what the regular hot water system can provide.

Differences Between Tank and Tankless Water Heaters

Tank and tankless water heaters both provide domestic hot water, but there are many differences between them. This article goes more in depth about the differences between the two systems, but here’s an outline:

6 Reasons to Upgrade to a Tankless Water Heater

There are indeed lots of reasons to get excited about installing a new tankless water heater for your home and here are just a few of them:

1. They Save You Money – A tankless water heater doesn’t use energy throughout the course of the day when no hot water is being called for. Traditional storage water heaters rely on a reservoir tank, and this tank is heated periodically so that when you do need hot water, it can supply it. However, what if you’re not home all day? Tankless models heat water only when it’s needed, so no extra energy is wasted when you don’t need hot water.
2. They Provide Nearly Limitless Hot Water – Since the water that passes through a tankless unit is heated on demand and fed from your water main, you can rely on nearly unlimited hot water. Tank-style heaters can only supply you with the amount of hot water that fits inside the tank, but advanced tankless water heaters can supply you with enough hot water to last for several consecutive lengthy showers, for example.
3. They Won’t Burst – Although rare, it can happen with ordinary storage water heaters. Since there is no tank incorporated into a tankless water heating system, there is no danger of one bursting and flooding part of your house.
4. They’re Space Efficient – Tankless water heaters are by and large much smaller than traditional units, which makes them ideal for smaller homes where storage and free space are at a premium.
5. Quicker Access to Hot Water – Because of their compact size, some tankless units can be installed in a closet or pantry close to the actual faucets. Traditional water heaters are generally installed in the basement next to the furnace, meaning you have to wait for the water to cycle through the pipes before it reaches the faucet or shower. Also, if your bathrooms are far apart, you could install a smaller unit in each bathroom so hot water is available right away.
6. Less Maintenance – Storage tank water heaters require regular maintenance, and that includes things like:
   • Testing the temperature-pressure-release valve
   • Draining the tank to get rid of sediment
   • Inspecting the anode rod
   • Maintaining insulation

Tankless water heaters do still need some TLC, but it’s not as labour-intensive as with storage water heaters. This is especially true of electric models, which have very low maintenance requirements.

How Much Does a Tankless Water Heater Cost?

Tankless water heaters are more expensive than storage water heaters, and the units alone can cost anywhere from $1,000 to $3,000. Tankless water heater cost and installation together could end up costing $2000 – $4500.

However, the final cost will depend on lots of things, including:

• The brand and model
• Flow rate (size of the unit)
• Natural gas/propane versus electric
• Potential installation complications
• Additional features and technologies

While you might pay more upfront to replace a water heater with a tankless system, you could save that and more in the long run thanks to lower energy bills, especially if you opt for a high-efficiency model. And you get the extra convenience of endless hot water on demand.

And don’t forget to check for available rebates before you buy to see how you could save on your upgrade.

Potential Rebates for Tankless Water Heaters

A tankless water heater in Canada might be more expensive than their storage counterparts, but there are often great rebates available that can help you save.

Rebates worth up to $1,000—which sometimes include free installation too—are often available through:

• Utility companies
• Local HVAC contractors
• Water heater manufacturers
• The federal or provincial government
• Energy and environmental organizations
• Banks and financial institutions

Measuring and Comparing Tankless Water Heater Efficiency

Like furnaces and air conditioners, modern tankless water heaters come in a range of efficiencies. Buying a high-efficiency model can reduce your energy or fuel consumption and lower your energy bills. Water heater efficiency is measured in a few ways, including:

• Standby loss
• Energy factor
• Uniform energy factor

Standby Loss (Electric Models)

Standby loss is sometimes used to measure the efficiency of electric tankless water heaters. The lower the standby loss in watts, the higher the efficiency.

Energy Factor (Gas, Propane, and Electric Models)

There are two calculations that can be used to measure the efficiency of any tankless water heater, and the first is energy factor.

Energy factor, or EF, is very similar to the AFUE rating on furnaces or the SEER rating on air conditioners. EF compares how much fuel/electricity the water heater uses with how much hot water it produces. The higher the EF rating, the better the efficiency.

Uniform Energy Factor (Gas, Propane, and Electric Models)

UEF, or uniform energy factor, is a more recent efficiency measurement for water heaters. Because it’s more accurate than EF, it’s becoming the industry standard.

UEF is also based on energy consumption versus hot water generated, but it also incorporates other important calculations, such as how much hot water a unit can produce in one hour when it starts with a full load of water. This is called the first-hour rating.

Higher UEF ratings indicate better efficiency.

Features and Technologies to Consider

Modern tankless water heaters have a lot more to offer than just heating up your domestic hot water, and manufacturers have been focusing on improving technologies, developing features, and adding perks to make their brands more competitive. Here’s a glance at some of the features you might like:

• High-efficiency and ENERGY STAR® certified models
• Condensing technology
• Wi-Fi compatibility for remote control
• Wired remote controls
• Recirculation pumps
• Preheating technology
• Low NOx emissions
• Modulating burners
• Digital displays

ENERGY STAR Certification

One of the easiest ways to ensure you’re getting a high-efficiency and high-performance tankless water heater is to look for ENERGY STAR certification. This tells you the model has been tested and is guaranteed to meet high-efficiency standards.

Natural Resources Canada estimates that ENERGY STAR certified tankless water heaters use an average of 30 percent less energy than storage water heaters, and that will translate to great cost savings over time.

Most of the ENERGY STAR electric tankless water heaters on the market have UEF ratings between 2.3 and 4. Gas tankless water heaters must have an EF of at least 0.90, or a UEF of at least 0.87.

Another benefit of ENERGY STAR models is they may be eligible for additional rebates that non-certified models don’t qualify for.

Learn more about ENERGY STAR certification and what it means here.

Condensing Technology

Many tankless water heaters use heat exchangers to heat water on demand. There are also models available that have secondary heat exchangers, and these are called condensing tankless water heaters.

Condensing models might be more expensive, but they’ll also be more efficient because they have the secondary heat exchanger to recover heat and energy that would otherwise be lost through venting.

Wi-Fi Compatibility

One of the coolest things about modern HVAC equipment is that it can be made Wi-Fi compatible. That means you can use devices like smartphones, tablets, and other smart technology to control and manage your water heater settings remotely, and that includes:

• Adjusting the water temperature
• Monitoring water use
• Keeping an eye on fuel consumption
• Setting the unit to vacation mode
• Getting maintenance updates

Recirculation Pumps

Tankless water heaters provide hot water on demand, but there is still a short lag between turning on the tap and getting your hot water, especially when you’re farther away from the heater.

Recirculation pumps reduce waiting time and are particularly useful in homes where the distance between the heater and the point of use is more than 50 feet.

Smart Preheating Technology

Another way some manufacturers reduce lag time between turning on the tap and getting hot water is with smart technology that tracks peak use times and ensures hot water is already there to meet your demands during those times.

Low and Ultra-Low NOx Emissions

Some tankless water heaters have been engineered with special technologies to reduce nitrogen oxide emissions. These models are better for the environment, and they meet strict NOx emissions standards for homes in municipalities that have air quality controls in place.

Modulating Burners

A tankless water heater with a modulating burner will adjust the burner to meet your demands and save as much energy as possible.

For example, if you only have one faucet demanding hot water, then the burner will reduce its output to save energy. The burner output will only increase as your hot water needs go up, so the unit will save energy and money.

Digital Displays

A digital display on the water heater might not be as fancy as Wi-Fi compatibility, but it still makes operating and monitoring your water heater convenient. A remote digital display connected by wire may be available.

Depending on how high-tech the display is, it might let you:

• See and change the temperature
• Set different modes
• Keep an eye on the flow rate
• Check the water pressure
• See maintenance requirements
• Check self-diagnostics for performance and issues

Potential Drawbacks of Tankless and How to Avoid Them

There are far more advantages to tankless water heaters than there are disadvantages, but it’s important to consider the cons before switching so you can take steps to avoid them.

Potential Drawback: Limited Flow Rate

First of all, tankless water heaters do have a finite flow rate, meaning they can only generate so much hot water at a time. For instance, if you have two people showering at the same time, another person doing dishes, and a fourth doing laundry, then the water heater might not be able to keep up with demand.

The Fix: Get the Right Size

Fortunately, there’s an easy way to avoid this problem, and that is making sure you size the tankless water heater properly for your home and your needs (more on that later).

Potential Drawback: Higher Purchase Price

Tankless water heaters do tend to cost more than storage water heaters, and there’s simply no way around this. But you can offset the cost in other ways.

The Fix: Saving Money Elsewhere

While tankless water heaters are more expensive, you will save money in the long run on energy bills because tankless water heaters are more efficient. You might also be able to save on the purchase price by finding rebates, looking for sales, and shopping around for the best prices.

Potential Drawback: Higher Installation Costs

Tankless water heater installation can be expensive compared to storage tank water heaters, and this is because they often use pipes that are a different diameter and have special ventilation requirements.

The Fix: Find the Right Contractor

We definitely don’t recommend trying to save money by installing a tankless water heater yourself, but you can shop around to find a local HVAC contractor who has the right tools, the right knowledge, and the right price.

Use our independent contractor certification program to find HVAC specialists nearby, or get a free quote today.

Sizing Your Tankless Water Heater Accurately

We’ve already mentioned what can happen if your tankless water heater doesn’t have a large enough flow rate for your needs, so now it’s time to talk about how to size your water heater properly.

Tankless water heaters are sized based on flow rate, which is measured in gallons per minute (GPM). To get an idea of what size water heater you need, start by adding up the flow rate (in GPM) of the water-using fixtures and appliances in your home. Don’t forget to include:

• Faucets
• Showerheads
• Dishwasher
• Washing machine

For example, if you have one shower with a 2.5-GPM flow rate, three faucets with a 1-GPM flow rate each, and a washing machine with a flow rate of 3 GPM, then you can start to look at water heaters with flow rates in the ballpark of 8.5 GPM.

However, there are other factors that must be considered when sizing a tankless water heater, including temperature rise. That’s the difference between the temperature of the water coming into the system versus the desired temperature of your hot water (this is usually 120 F maximum).

Because sizing a tankless water heater properly is part math and part art, your best bet is to have it properly sized by a professional HVAC technician.

Comparing Fuel Options for Tankless Water Heaters

One decision you’ll have to make when buying a tankless water heater is what fuel to use. This type of water heater is available in natural gas or propane and electric models. There are pros and cons to the different fuel sources, so it’s important to weigh your options carefully.

Outdoor Tankless Water Heater Options for Milder Climates

Tankless water heaters come in both indoor and outdoor models.

Outdoor tankless water heaters aren’t typically practical in Canada. These units do have built-in freeze-prevention devices, but they will use a great deal of energy during our long, cold winters. Moreover, the outdoor pipes must be carefully insulated to prevent freezing.

However, if you live somewhere with milder winters, like Vancouver Island, then you could consider an outdoor tankless water heater.

There are a few advantages to outdoor models, including additional space-saving, and cheaper and faster installation because you don’t have to worry about ventilation.

3 Important Questions to Help You Determine if Your Water Heater Is Due for an Upgrade

How Old is Your Tank?

You can usually find out the age of your water heater by checking the sticker on the side. It should have the name and number of the contractor who installed it and the unit’s serial number. Once you have these, a simple phone call will tell you all you need to know about the age of your water heater.

Are You Satisfied with Its Performance?

Are you getting the hot water you need? Sometimes all it takes to make your water hotter is a simple adjustment of a valve, but if you have already maxed out the capacity of your water heater, then it may be time to consider an upgrade.

Are You Paying Too Much?

Take a look at your energy bills. Have they been steadily rising over the past months or years? The culprit could be your old, inefficient water heater.

If you answered old, no, and yes to these questions respectively, then a tankless water heater might be able to solve all of these issues.

Common Warranty Coverage for Tankless Water Heaters

Warranties are something you will definitely want to consider when buying a tankless water heater, especially when you think about the additional up-front cost of buying a tankless model.

Longer warranties can save you plenty on maintenance and service costs over the years, but they can also give you a good idea of how long you can expect your new water heater to perform reliably and optimally.

The warranty terms you get with your tankless water heater will depend largely on the brand and style. Electric models have much shorter warranties than natural gas or propane ones, but some brands offer longer terms than others.

Here are some common warranty terms to look for when you’re shopping:

*Labour warranties aren’t common with tankless water heaters, but some brands do offer them.

Our local dealers would be happy to answer your questions regarding particular models, installation, or tankless water heaters in general.

Installation and Maintenance

Tankless Water Heaters and the Importance of Professional Installation

We already mentioned that installing a tankless water heater—especially a gas or propane model—can be more complicated than with storage water heaters, and this is just another reason it’s so important to trust the installation to a professional.

Beyond that, tankless water heaters can be pricey, and proper installation ensures optimal performance and peak efficiency, meaning you’ll get the most out of your investment.

Another reason professional installation is important is your warranty: many terms dictate that installation must be performed by an expert HVAC technician, otherwise you risk voiding your warranty.

Installation Requirements: What to Expect

If you’re wondering, “how do you install a tankless water heater,” let’s go over the steps so you know what to expect when your local HVAC expert comes to install it:

1. Turn off the power (gas or electricity) and water to the old water heater
2. Drain, disconnect, and remove the old unit
3. Choose a location for the new water heater that’s close to water/power hookups and is suitable for ventilation and clearance
4. Secure the unit to the wall
5. Connect the water lines
6. Connect the gas or electricity
7. Install proper ventilation
8. Turn on the water and power and test the new unit

Common Installation Mistakes and How to Avoid Them

Installing a tankless water heater incorrectly can lead to performance/efficiency issues and possibly safety hazards. Here are the most common mistakes and how to avoid them:

• Unit is the wrong size: Calculate the capacity during peak demand
• Choosing the wrong location: Choose a spot with the right amount of clearance, ventilation, and that’s close to high-use fixtures
• Incorrect gas line size or incorrect venting: Consult an HVAC professional to avoid gas leaks, carbon monoxide buildup, and poor efficiency
• Ignoring hard water: If you live in an area with hard water, consider installing a water softener to prevent mineral buildup. Alternatively, descale the unit annually
• Underestimating power requirements (electric models): Check your electrical panel capacity before installation—most electric tankless water heaters require 240 volts and a dedicated breaker
• Not installing drainage for a condensing model: A condensing tankless water heater has a condensate drain line that needs to drain to a floor drain, sump pump, or neutralizer kit

Maintaining Your Tankless Water Heater: Tips for Longevity

Regular maintenance and care can help you get the longest life possible from your tankless water heater and keep it working efficiently. Here are some maintenance tips:

• Clean/replace the filter annually (most tankless water heaters have a filter at the water inlet)
• Descale the unit regularly if you have hard water to prevent mineral buildup
• Keep the exterior of the unit clean and free of dirt, dust, and debris
• Flush the unit to remove dirt and debris from the system

How to Descale a Tankless Water Heater

You might have to descale your tankless water heater periodically if you live in a place with hard water and don’t have a water softener. The steps include:

1. Turn off the power and water
2. Attach one end of a hose to a submersible pump and the other end to the cold water inlet
3. Attach a second hose to the hot water inlet and put the free end in a bucket
4. Fill another bucket with descaling solution or a vinegar and water mixture
5. Place the pump in the bucket
6. Turn on the pump and allow the descaling solution to circulate for about 45 minutes
7. Turn off the pump and dispose of the descaling solution
8. Refill the bucket with clean water and run it through the system for about five minutes
9. Remove the hoses, close the valves, and restore power and water

Which Brand of Tankless Hot Water Heater is Best? Comparing Models and Brands

While the first place you should start when considering a tankless water heater is the needs of your household, you should also be mindful of the brands and models that different manufacturers offer.

Popular Tankless Water Heater Brands

Rheem, Navien and Stiebel are among the most popular tankless water heater brands in Canada, but there are many others to check out as well, including:

• GSW
• Bradford White
• Whirlpool
• Rinnai
• Giant
• Takagi
• John Wood
• Bosch
• AO Smith
• GE

Electric vs. Gas Tankless Water Heaters: Pros and Cons

Tankless water heaters are available in gas and electric models, and each type has its own set of pros and cons.

Gas tankless water heater pros:

• Long lifespan
• Lower operating costs
• Can handle high hot water demands

Gas tankless water heater cons:

• Higher upfront costs
• Not as efficient as electric models
• Installation is more complex
• Require more maintenance
• High environmental impact

Electric tankless water heater pros:

• Highly efficient
• Easy to install
• Low maintenance requirements
• Cheaper to buy and install
• Compact size
• Quiet operation
• Environmentally friendly

Electric tankless water heater cons:

• May require upgrades to your electrical panel
• Higher operational costs
• Lower flow rates (better for small homes with lower hot water demands)
• Shorter lifespan

Top-Rated Tankless Water Heater Models for 2025

Rinnai RU199iN: A gas-powered unit that’s ideal for large households, with ENERGY STAR® certification for high efficiency.

Rheem RTEX-18: An electric tankless water heater designed for small to medium-sized homes or point-of-use applications, with a compact design that offers unlimited hot water and modulating technology.

Stiebel Eltron Tempra 36: An electric model that can handle the demands of larger households, it has special features to ensure consistent water temperature and quiet operation.

Takagi T-H3-DV-N: A natural gas unit suitable for multiple simultaneous uses, it has condensing technology for improved energy efficiency and freeze protection.

Cost and Savings

Tax Credits and Incentives for Energy-Efficient Water Heaters

HVAC equipment is an investment for your home, and there are often rebates available from the government, utility companies, banks, energy organizations, and HVAC manufacturers and companies that can help offset the cost.

Most of the rebates and incentives are for energy-efficient equipment, especially ENERGY STAR certified models. These models tend to cost more, and rebates can help you afford something more efficient that will reduce your power consumption long term.

Check out what rebates are available before you buy, as many incentive programs require you to apply in advance.

How Much Can You Save on Utility Bills with a Tankless Water Heater?

A tankless water heater uses about 30% less energy than a traditional tank water heater. This could potentially translate to annual savings of $100 to $200, and possibly more for larger homes.

What Homeowners Say About Their Tankless Water Heaters

Canadian homeowners find pros and cons with tankless water heaters, but overall, they find them to be good investments thanks to their long lifespans and efficient performance.

Additional positives include that they reduce energy use, provide a constant supply of hot water, free up additional space compared to a tank water heater, and are more environmentally friendly.

On the other hand, tankless systems do have a higher upfront cost, and they can face challenges in cold climates, such as meeting hot water demands or getting the water to temperature.

FAQ

Can I replace my existing tank water heater with a tankless water heater?

Yes, you can install a tankless water heater even after you’ve had a tank water heater. However, the installation may take longer, be expensive, and be more complex because of potential gas line, electrical, plumbing, and ventilation upgrades.

Is it worth switching to a tankless water heater in Canada?

Switching to a tankless water heater can be worth it, but it depends on factors like your household size, water usage habits, budget, and location. If you plan to stay in your home long-term and want energy savings, a tankless water heater is a great investment. But if you want a lower upfront cost and low maintenance, a traditionaltank might be the better choice.

Can I install a tankless water heater in my attic?

Yes, you can install a tankless water heater in your attic, but there are important factors to consider before doing so. You may have to insulate both the unit and the water lines to prevent freezing, even if the unit has built-in freeze protection. You also have to ensure there’s proper ventilation, drainage, and accessibility for installation and maintenance.

Is it possible to drain a tankless water heater to prevent freezing damage when not in use?

Yes, you can and should drain a tankless water heater to help prevent freezing damage when the unit isn’t in use, especially in cold climates like Canada. This is even true if the unit has built-in freeze protection.

Is it true that some types of tankless water heaters cannot be installed in certain areas?

Yes, it is true that certain types of tankless water heaters cannot be installed in specific areas due to safety, ventilation, and performance concerns. For example, you can’t install a gas water heater in a small, enclosed space because of ventilation and overheating, but you can potentially install an electric model in closets, cabinets, or crawl spaces. Similarly, you have to be careful installing a water heater in an attic or on an exterior wall in cold climates and have to take steps to prevent freezing. Another thing to keep in mind is water pressure. If your home has low water pressure, it may not meet the minimum water flow rate to activate the heater, and you may need to install a booster pump or consider a different water heater.

How many hours does it take to install a tankless water heater?

It typically takes anywhere between four and 10 hours to install a tankless water heater, depending on the complexity of the job.

Sources

• Water Heaters
• Understanding Energy Efficiency in Water Heaters
• Sizing a New Water Heater
• Tankless water heaters
• ENERGY STAR Certified Water Heaters