An on demand tankless water heater system that is capable of quickly delivering water within a desired temperature range. The tankless water heater provides a hybrid heating method that contains a primary heating system and a secondary heating system disposed in a buffer tank that cooperate to facilitate control of output water temperature during water usage. A pressure differential switch detects low flow demand and allows the secondary heating system to provide immediate heating to the water. This secondary heating system provides a faster temperature response and fine tuning of output water temperature.