Tankless, Tank or Heat Pump: Choosing a Water Heater for Your Home

Tankless water heaters are a good fit for many homes, not all of them. This page compares the three options most Lakes Region homeowners weigh, so you can see where tankless earns its place and where something else may suit you better.

Gas or propane tankless

How it works. It heats water only as it flows, instead of keeping a tank hot. ^[1]

Strengths

• It doesn't run out the way a tank does. A properly sized unit supplies hot water continuously, up to its output limit.
• There is no tank sitting hot around the clock, so no standby heat loss.
• It is compact and wall-mounted, which frees floor space.

Trade-offs

• Its output is limited at any moment, and that limit drops as incoming water gets colder. Sizing for winter matters. See sizing.
• It usually needs a larger gas supply and its own venting, and condensing models need a condensate drain. ^[2]
• It needs electricity to run, so no hot water during a power outage, and its freeze protection needs power too. ^[3]
• It needs periodic descaling and filter cleaning.

Conventional storage tank (gas, propane or electric)

How it works. It keeps a tank of water hot and ready.

Strengths

• Usually the simplest and least expensive replacement, especially like-for-like.
• It can deliver a lot of hot water at once, until the tank's supply is used up.

Trade-offs

• It can run out during heavy use, then needs time to recover.
• It loses heat from the stored water around the clock.
• The tank takes up floor space.

Heat-pump water heater (electric)

How it works. It is a storage tank that heats water mainly by moving heat from the surrounding air, rather than making heat with electric elements alone.

Strengths

• It is much more efficient than a standard electric tank.
• It is often the natural choice for homes without natural gas or propane.
• NHSaves currently offers a rebate on qualifying models (see below).

Trade-offs

• It still stores hot water, and can run out during heavy use.
• It needs space and air around it, and it cools the room it sits in, which matters in a small or cold space.
• It suits some basements and utility rooms better than others.

Which one fits your home?

If your home…	Worth a close look
has natural gas or propane, and you run out of hot water with a tank	tankless, sized for winter
has no gas, and has room for a tank in a reasonably warm space	heat-pump water heater
uses little hot water, or you want the simplest replacement	a new storage tank
often loses power for long stretches in winter	think carefully about tankless, or plan backup power

We install tankless water heaters. If a tank or a heat-pump water heater suits your home better, we will tell you.

2026 rebates at a glance

Checked September 23, 2026. Programs, amounts and eligibility can change, and funds are limited, so confirm with NHSaves before you buy.

• Natural gas water heating (NHSaves). For Liberty and Unitil natural gas customers only. A qualifying on-demand tankless heater (0.87 UEF or higher) is listed at $500 on both utilities' 2026 rebate forms. Liberty's form also lists condensing, storage and indirect water heaters at other amounts. Equipment must be installed in 2026 by a licensed plumber or heating contractor, and rebates are capped at 50% of cost. Propane accounts do not qualify. ^[4]
• Heat-pump water heaters (NHSaves). $900 on qualifying ENERGY STAR models up to 85 gallons, for residential electric customers of Eversource, Liberty, NHEC and Unitil. Models of 55 gallons or less get the rebate instantly through participating distributors; larger models use a mail-in or online form. ^[5]
• Federal tax credit. The federal Energy Efficient Home Improvement Credit applied to qualifying property placed in service through the end of 2025. It is not available for equipment installed in 2026. ^[6]

Not every home or utility account qualifies.