Types of Residential Water Heaters. Most of us take our water heater for granted along with the luxury of having piping hot water dispensed from any tap in your home on demand. Many homeowners don't even think about their water heater until it causes problems. Water heaters are one of the hardest working appliances in any home, just think how many things would be impossible without the miracle of on-demand hot water like laundry washing dishes or showering. There are three distinct types of water heaters each with its own unique set of advantages and disadvantages. Solar Water Heater. Renewable solar energy is currently the only free option for water heaters. They are not appropriate for every home and situation but if the conditions are right, they are a fantastic investment. Conditions including the roof direction area or residence and size of the family must be met to qualify your home for solar power. The most common water heater type is a storage or tank water heater.