Video of the problem:
My heater stopped blowing hot yesterday. I recall seeing a fresh puddle of liquid under my car a few days prior but did not make much of it since it had recently rained; I did not check fluids at this time. I have driven the car plenty since I noticed the puddle. The heater was blowing hot air and the car did not over heat at all. Since yesterday the heater has been blowing cold but still does not overheat

The video I made is from the driver side from behind the wheel with my head pointed towards the rear of the vehicle. The water appears to be dripping from the passenger side. I topped off the reservoir and the level dropped a bit when I stopped filling it. In the video the heater has been turned on to the max heat setting. The heater was now blasting hot air as usual. I noticed a fluctuation in temperature on the temp gauge everytime I turned the heater on; the temperature dropped when the heat was on. This has never happened before; I understand why this would happen but has never happened before.

As i mentioned the heater was on during the video, when off however water dripped at about a 1/4 of this rate.

The engine oil cap does not have any rings around the top. The oil smells fine and the coolant reservoir does not appear to have any oil in it.

Any clue as to where the water might be dripping from?

 

On my 2005 T5 the leak in that area was a radiator hose. #2 in this diagram. I also had a leak in the #10 hose.

RADIATOR & COMPONENTS for 2007 Volvo S40

The no-heat issue is because the fluid level is too low.

 

I was able to get a better look from underneath the car and noticed the coolant dripping from the hose circled in the image(not my car). I cannot identify the origin of the leak because there is a lot of stuff in the way and I am not able to see what the hose hooks up to on the other end (not the radiator end). I tried to cross reference the product images on the link you provided but am unable to identify which hose this is.

What does this hose connect to (radiator to _______)?
Is this the upper or lower radiator hose? or something completely different?

Also the upper hose in the first diagram is different from the upper hose in the second diagram. What is the reason for this?

Thank You!

 

That's the upper radiator hose. It is the same one mentioned by Hudini. It connects the radiator to the thermostat and water pipe as well as the transmission cooler.

 

Yes, the upper radiator hose has some plastic "T's" molded in which tend to crack and leak. Change the hose immediately.