The renewable energy sources are mainly electricity. Therefore, it is necessary to retrofit HVAC facilities from the use of fossil fuels to that of electricity to reduce carbon emissions and save energy in buildings. Recently, a cascade heat pump system was studied as a multi-functional system for indoor air heating with a low-cycle heat pump and water heating with a high-cycle heat pump as the electrical-energy consuming system. The refrigerant flow passage of the intermediate heat exchanger was divided into a series type and parallel type by installing a by-pass valve. This study aims to perform a comparative analysis of the system performance according to the refrigerant flow settings in two operation modes. The hot-water-only heating mode was set as a reference mode. The air and water heating mode was the proposed operation mode. The manufactured heat pump system was installed in the basement of the experimental building at the Korea Institute of Energy Research in Daejeon, Korea. The compressor capacity of the low-cycle heat pump was designed to be 3 HP and that of the high-cycle heat pump was designed to be 4 HP. The refrigerants R410A and R134a were applied in low-cycle and high-cycle, respectively. A geothermal source was used to conduct the experiment. Five levels of the by-pass valve opening rate was selected: 0%, 25%, 50%, 75%, and 100%. Results showed that the supply air temperature had a positive correlation with the by-pass valve opening rate. The maximum indoor supply air temperature was 83.19°F (28.86°C). Meanwhile, there was no clear correlation with the hot water temperature. The energy consumption showed that the proposed mode consumed 20.93 kBtu/h (6.13 kW), whereas the reference mode consumed 22.66 kBtu/h (6.64 kW) at 100% opening rate. The total heating rate of the indoor air and water was 58.84 kBtu/h (17.25 kW) and 60.13 kBtu/h (17.62 kW) in the reference mode and proposed mode, respectively. Therefore, the total system coefficient of performance of the proposed mode was 6%–16% higher than that of the reference mode at difference opening rates. This was because the compression ratio of the proposed mode was 19% lower than that of the reference mode in the low-cycle heat pump. The high-cycle compression ratio increased marginally in the proposed mode; however, the total heating rate increased.