A home equity line of credit, or HELOC, usually has two distinct phases: a draw period and a repayment period.
During the HELOC draw period, you can access the credit line and may be allowed to make interest-only payments. When the draw period ends, you generally cannot borrow more and must repay the remaining balance over a set number of years.
The transition can cause a noticeable payment increase, particularly if you paid only interest during the draw period or your HELOC has a variable interest rate.
HELOC Draw Period and Repayment Period Basics
| Feature |
Draw Period |
Repayment Period |
| Typical length |
Often five to 10 years |
Often 10 to 20 years |
| Can you borrow? |
Generally yes, up to the available credit limit |
Generally no |
| Required payment |
May be interest-only or may include some principal |
Usually includes principal and interest |
| Credit availability |
Repaid principal may become available to borrow again |
Payments reduce the balance but do not restore borrowing access |
| Interest rate |
Often variable and subject to change |
May remain variable or follow other terms in the agreement |
These are common structures rather than universal terms. Your HELOC agreement should state the length of each period, how payments are calculated and whether any balance is due as a balloon payment.
What Are the Two Phases of a HELOC?
A HELOC is a revolving line of credit secured by your home. It works differently from an installment loan that provides one lump sum and begins amortizing immediately.
The two phases divide borrowing from repayment:
- Draw period: The line is open, and you can generally access available credit.
- Repayment period: Borrowing stops, and the remaining balance must be repaid under the HELOC agreement.
The distinction is central to how a HELOC works. A low payment during the draw period may not reflect the amount required after repayment begins.
What Is the HELOC Draw Period?
The HELOC draw period is the portion of the loan term when the credit line is generally available for borrowing.
Many HELOCs have a draw period lasting five to 10 years, although the exact term depends on the lender and loan agreement.
During this phase, you may be able to:
- Withdraw funds up to your available credit limit
- Repay borrowed amounts
- Borrow the repaid principal again
- Transfer funds electronically
- Use checks or another lender-provided access method
Some lenders require a minimum initial draw or a minimum amount for later withdrawals. The lender may also freeze or reduce access under circumstances allowed by the HELOC agreement and federal law, such as a significant decline in the home’s value or a material change in your ability to repay.
Do You Pay Principal During the Draw Period?
It depends on the HELOC.
Some plans allow interest-only minimum payments during the draw period. You pay the interest charged on the amount you borrowed but are not required to reduce the principal balance.
Other plans require a payment that includes interest and part of the principal. Even then, the required payment may not fully repay the balance before the draw period ends.
You can generally pay more than the minimum unless the agreement states otherwise. Paying principal during the draw period can reduce future interest and limit the payment increase when repayment begins.
How Do Interest-Only HELOC Payments Work?
An interest-only payment covers the interest accrued during the billing period without reducing the amount borrowed.
Suppose you have a $75,000 HELOC limit but have drawn only $50,000. At an 8.50% interest rate, the approximate monthly interest-only payment would be:
$50,000 × 8.50% ÷ 12 = about $354
After making that payment, the principal balance would generally remain $50,000. If the rate increased or you borrowed more, the required payment could rise even during the draw period.
What Is the HELOC Repayment Period?
The HELOC repayment period begins when the draw period expires. You generally lose the ability to make new withdrawals and begin repaying the outstanding principal along with interest.
A repayment period commonly lasts 10 to 20 years, although some HELOCs use different terms. A shorter repayment period produces a higher monthly payment because the balance must be paid over fewer months.
During repayment:
- New borrowing generally stops.
- Your outstanding balance is placed on a repayment schedule.
- Payments usually include principal and interest.
- The balance declines as principal is repaid.
- The interest rate may continue to change if the HELOC remains variable-rate.
Some HELOC agreements instead require a balloon payment, meaning all or a large portion of the balance becomes due at once. Review the agreement rather than assuming the balance will automatically be amortized over 20 years.
What Happens to Unused Credit?
Unused borrowing capacity generally disappears when the draw period ends.
For example, if your credit limit is $100,000 and your balance is $40,000, you may have $60,000 in available credit shortly before the draw period expires. Once repayment begins, you generally cannot borrow that $60,000 unless the lender renews the line or approves a new HELOC.
HELOC Interest-Only vs. Amortizing Payments
An interest-only payment and an amortizing payment affect the balance differently.
| Payment Type |
What the Payment Covers |
Effect on Principal |
| Interest-only |
Accrued interest for the billing period |
The principal generally does not decrease |
| Partially amortizing |
Interest plus some principal |
The balance declines, but may not be fully repaid by the end of the term |
| Fully amortizing |
Interest plus enough principal to repay the balance over the scheduled term |
The balance reaches zero if all scheduled payments are made |
An interest-only draw payment can make the HELOC appear inexpensive in the short term. The unpaid principal still must be addressed when the repayment period begins.
Why Can Payments Jump When the HELOC Draw Period Ends?
The payment can increase at the end of the draw period because the required payment changes from interest-only or limited principal to full principal-and-interest repayment.
This increase is sometimes called payment shock.
HELOC Payment-Shock Example
Assume:
- You have a $50,000 HELOC balance.
- The interest rate is 8.50%.
- You have been making interest-only payments.
- The balance will be repaid over 20 years.
- The rate does not change for purposes of the example.
During the draw period, the estimated interest-only payment would be about $354 per month.
Once a 20-year repayment period begins, the estimated principal-and-interest payment would be about $434 per month.
| Phase |
Approximate Monthly Payment |
Principal Reduction |
| Interest-only draw period |
$354 |
None required in this example |
| 20-year repayment period |
$434 |
Included in each payment |
The payment rises by about $80 per month in this example. If the same $50,000 balance had to be repaid over 10 years, the estimated payment would be about $620 per month.
The actual payment can be higher or lower because HELOC rates often change over time. The repayment schedule, balance and rate in effect when the draw period ends will determine the required amount.
How Do Variable Rates Affect Both HELOC Periods?
Most HELOCs have variable interest rates. The rate is commonly based on a published index plus a lender-set margin.
If the index rises, your rate and payment may rise. If it falls, the rate may decline, subject to the HELOC’s rate floor, caps and other terms.
During an interest-only draw period, a rate increase raises the amount of interest due. During repayment, a rate increase can raise the payment needed to repay both principal and interest.
The details of how HELOC rates work include the index, margin, introductory rate and lifetime or periodic rate limits.
Some HELOCs allow you to convert part of the variable balance to a fixed-rate segment. Availability, fees and repayment terms vary by lender.
What Happens When the HELOC Draw Period Ends?
When the draw period ends:
- You generally cannot make new withdrawals.
- Automatic access methods may stop working.
- The remaining balance enters repayment.
- Your minimum payment may rise.
- Your variable rate may continue changing.
- A balloon payment may be due if the agreement does not include an amortizing repayment period.
Your lender should provide information about the repayment terms in the HELOC disclosures and agreement. Review those documents well before the transition date.
What Are Your Options at the End of the Draw Period?
Repay the Balance Under the Existing Terms
You can allow the HELOC to enter its scheduled repayment period and make the required principal-and-interest payments.
This avoids applying for a new loan, although the payment may be higher and the rate may remain variable.
Pay Down the Balance Before Repayment Begins
Making additional principal payments during the draw period reduces the balance that must be amortized later.
Before sending extra money, confirm that the servicer will apply the amount to principal and review whether any minimum draw or balance requirements apply.
Refinance the HELOC
You may be able to replace the existing line with:
- A new HELOC with another draw period
- A home equity loan with fixed installments
- A cash-out refinance that combines the HELOC and first mortgage
- Another eligible mortgage or home equity product
Whether you can refinance a HELOC depends on your credit, income, debts, property value, available equity and the loan products offered.
Refinancing is not automatic. A new loan can include closing costs, a new interest rate and a longer repayment period.
Ask About Renewal or Extension
Some lenders may offer to renew the line or extend the draw period. This generally requires approval and may involve new credit, income or property review.
Renewal terms can differ from the original HELOC. Review the new rate, draw period, repayment period and fees before accepting an extension.
Use a Home Equity Loan
A home equity loan provides a lump sum with scheduled installment payments. It may offer a fixed rate, while a HELOC usually provides revolving access with a variable rate.
The differences between a HELOC and a home equity loan include how funds are accessed, how payments work and whether you can borrow repeatedly.
How to Prepare for the HELOC Repayment Period
Confirm the Transition Date
Check your agreement or contact the servicer to identify when the draw period ends and when the first repayment-period payment is due.
Request a Payment Estimate
Ask how the new payment will be calculated using the current balance, interest rate and repayment term. Because variable rates can change, treat the amount as an estimate.
Stop Treating Available Credit as Savings
Unused HELOC credit is borrowed money rather than an emergency fund. Access can end when the draw period expires or may be restricted under circumstances allowed by the agreement and federal law.
Pay More Than Interest When Possible
Principal payments made before the transition can reduce the amount that must be repaid later.
Compare Options Before the Deadline
Applying for a refinance or replacement HELOC can take time. Begin reviewing alternatives before the draw period expires rather than after the higher payment becomes due.
The Bottom Line
A HELOC draw period is the portion of the loan when you can generally borrow, repay and borrow again up to your available credit limit. Payments may be interest-only, which can leave the principal balance largely unchanged.
When the repayment period begins, new borrowing usually stops and payments commonly include both principal and interest. The payment can increase sharply depending on the balance, rate and length of the repayment term.
Review your HELOC agreement before the draw period ends. Paying down principal, refinancing, renewing the line or preparing for the scheduled repayment payment can reduce the risk of an unexpected budget problem.
Frequently Asked Questions
How Long Is a HELOC Draw Period?
A HELOC draw period commonly lasts five to 10 years. The exact length depends on the lender and the terms of your agreement.
How Long Is a HELOC Repayment Period?
A repayment period commonly lasts 10 to 20 years. Some HELOCs use shorter terms or require a balloon payment instead of a long amortization schedule.
Can You Still Borrow During the HELOC Repayment Period?
Generally, no. New borrowing usually stops when the draw period ends. You would need a renewal, extension or new line of credit to regain access.
What Happens When a HELOC Draw Period Ends?
You generally stop being able to borrow and begin repaying the remaining balance. Payments may rise because they now include principal as well as interest.
Why Did My HELOC Payment Increase?
Your payment can rise because the interest rate increased, you borrowed more or the HELOC moved from an interest-only draw period to principal-and-interest repayment.
Do HELOC Payments Include Principal During the Draw Period?
Some do, but others allow interest-only minimum payments. Review your agreement to determine how the required payment is calculated.
Can You Pay Off a HELOC During the Draw Period?
Yes. You can generally repay the balance during the draw period, although the line may remain open and available for new borrowing until the draw period expires.
Can You Extend a HELOC Draw Period?
Possibly. The lender may offer a renewal or extension, but you may need to qualify again. The new line can have different rates, fees and repayment terms.
Can You Refinance Before the HELOC Repayment Period Begins?
Yes. You may be able to refinance into a new HELOC, home equity loan or another mortgage before repayment begins. Approval depends on your finances, property and available equity.
Does a HELOC Have a Balloon Payment?
Some HELOCs do. A balloon structure may require the full remaining balance at the end of the draw period or loan term. The HELOC disclosures and agreement should state whether a balloon payment can occur.
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