Types of Water Heaters Explained: Which One Is Best for Your Home

Whether you have a rambling home with a dozen family members or a small cottage for just you and your spouse, the right water heater type makes a major difference in the cost and performance. Your water heater selection will vary based on your general hot water needs, the space you have available, and your overall budget.

To help you make the right choice, we’ll break down some of the best water heater types in this guide for Colorado homeowners.

1. Tank (Storage) Water Heaters

As the name suggests, a tank water heater comes with a tank for storing water. Water is heated and stored in the tank until it can be used. Often, these units have a lower upfront cost and straightforward maintenance. They are also extremely reliable. Additionally, you can enjoy having hot water during power outages.

However, a tank water heater also has drawbacks. They can only hold so much water, so it’s possible to use up all of the hot water in the tank. Because the water must be heated and maintained at a high temperature, it can end up using extra energy. Compared to tankless models, these units also take up a decent amount of space and have shorter lifespans.

2. Tankless (On-Demand) Water Heaters

When comparing tank vs. tankless water heaters, tankless water heaters are a clear winner when it comes to energy efficiency and convenience. A home that uses less than 41 gallons a day will spend 24% to 34% less on energy when it switches to a tankless water heater. However, water isn’t stored with this type of water heater. Instead, it flows through a heat exchanger and is warmed up by an electrical element or a natural gas burner.

Tankless water heaters use less space and last longer than tank water heaters. Because you don’t have sediment building up in a tank, the water is also cleaner. While the upfront costs are often higher, you’ll spend less on electricity. Plus, you don’t ever have to worry about the hot water running out.

3. Gas Water Heaters

One of the most common water heater types is a gas water heater. In this system, cold water enters through a dip tube and is heated by the gas burner. When you need it, the hot water exits the tank and travels through your home’s plumbing system.

These units often have lower operating costs than electric heaters, but they are more complex to install and may cost more upfront. However, gas water heaters have the added convenience of working during power outages.

4. Electric Water Heaters

Electric water heaters use electricity to heat water instead of gas. When comparing electric vs. gas water heater options, it’s important to consider your home’s existing power sources. If you don’t already have natural gas hook-ups, electric water heaters will likely be the most cost-effective option.

In general, electric water heaters are more power efficient, which can be further maximized by using solar panels on your home. Besides having a lower upfront cost, electric water heaters are also known for being extremely safe. However, they have higher ongoing costs and slower heating speeds.

5. Hybrid (Heat Pump) Water Heaters

Heat pump water heaters can be two to three times more efficient. Like the heat pumps that are used to heat and cool your home, these devices work by transferring heat. While they can be complex to install and require additional space, these heat pumps can save you money over the long run. Depending on the model, you may also get smart features that let you adjust the energy usage.

Although heat pump water heaters work well in most of the country, they aren’t ideal for every situation. For the best results, you need plenty of space to install the unit, a warm ambient temperature, and decent ventilation.

6. Solar Water Heaters

If you’re looking for an off-grid, renewable option, solar water heaters are some of the best water heaters for homes. On top of saving money on energy costs, you can also qualify for a federal tax credit for installing a solar water heater. However, solar water heaters can only function if there is an adequate amount of sunshine, which limits their usage. To keep these heaters operational all year, a backup system is often necessary.

7. Smart Water Heaters

If you need help choosing the right water heater, our plumbers have the experience and technical knowledge you need. When it comes to the most energy-efficient types of hot water heaters, smart water heaters are often the best choice. 

These systems have remote control capabilities, so you can adjust them from any location. They can learn your family’s preferences and behaviors, reducing the amount of energy wasted. Plus, they offer superior leak detection and safety features.

8. Recirculating Water Heaters

Demand recirculating water heaters are a convenient option that reduces wasted water. Normally, you have to wait for the water to warm up before getting in your shower. With recirculating water heaters, the cold water in your hot water lines is rapidly pulled back into the system so that you get hot water faster. 

Because hot water continues to circulate through pipes, you can save money on energy costs and enjoy instant hot water. However, depending on the amount of heat lost by the pipes, it’s also possible to spend more on energy costs each month.

How To Choose the Right Water Heater Type for Your Home

If you are struggling to figure out how to choose a water heater, consider the following factors.

• Household Size: For extremely large households, it may make more sense to have a tank water heater with an extra-large tank so that water is always available.
• Space Availability: When you’re short on space, opt for a tankless water heater. 
• Energy Efficiency: Energy-efficient heaters save you money on your power bills and may qualify for tax credits as well.
• Budget: You need to find a water heater that works for your current budget and minimizes your future energy costs.

Learn more by reaching out to our team of water heater installation and replacement experts.

FAQs About Water Heater Types in Littleton

Over time, we’ve found that Littleton residents have a few common questions about the best water heater types.

What are the three types of water heaters?

The three main types of water heaters are:

1. Storage Tank Water Heaters – Keep a large volume of water hot and ready for use in an insulated tank.
2. Tankless (On-Demand) Water Heaters – Heat water instantly as it passes through the unit, without storing it.
3. Heat Pump (Hybrid) Water Heaters – Use electricity to move heat from the air or ground into the water, making them highly energy-efficient.

Each type differs in cost, efficiency, and space requirements, so the best choice depends on your household size, budget, and hot water needs.

Which is better, a tankless or a regular water heater?

A tankless water heater is better for continuous hot water, higher energy efficiency, and longer lifespan, but it costs more upfront and may need electrical or gas upgrades.
A tank (storage) water heater is better for lower purchase and installation costs and simpler maintenance, but it uses more energy to keep water hot and typically lasts 8–12 years.

The best choice depends on your household size, budget, and hot water usage patterns.

What is the most efficient type of water heater?

A heat pump water heater (also called a hybrid water heater) is typically the most efficient. It uses electricity to move heat from the surrounding air into the water, rather than generating heat directly. This can make it 2–3 times more efficient than standard electric or gas models, especially in mild to warm climates.

How do I know which water heater is right for me?

Choosing the right water heater depends on your household size, daily hot water demand, energy source, and budget. For small households or those wanting unlimited hot water and higher efficiency, a tankless water heater may be ideal. Larger households with high simultaneous usage often benefit from a storage tank water heater for a consistent supply. If lowering energy bills is your priority, consider a heat pump (hybrid) water heater. Also, factor in installation costs, available space, maintenance needs, and the average lifespan of each type to make the best choice.

Our water heater experts can carefully review your needs and recommend the best solutions for your budget, current fuel source, space availability, and personal preferences.

Find Out More From Our Water Heater Experts

Are you unsure about which water heater type is right for your home? Contact our team today for expert recommendations and same-day water heater installation services.