HELOC repayment happens in two separate time periods, and the rules change between them

A HELOC (home equity line of credit) splits into a draw period and a repayment period. During the draw period — typically 5 to 10 years — you can borrow money whenever you need it and pay only interest on what you've taken out. Once the draw period ends, the repayment period begins, usually lasting 10 to 20 years. At that point, you can no longer borrow, and you must pay back both principal and interest on whatever balance remains.

The total length of your HELOC depends on which lender you use and what terms you negotiated. A HELOC with a 7-year draw period and a 20-year repayment period lasts 27 years total. One with a 10-year draw and a 10-year repayment lasts 20 years. Your loan documents spell out both dates, and your lender will notify you before the draw period ends so you know when your payment obligations change.

Key Takeaways

  • The draw period typically lasts 5 to 10 years, during which you can borrow and repay only interest.
  • The repayment period typically lasts 10 to 20 years after the draw period ends, when you must pay principal and interest and cannot borrow more.
  • Your total HELOC length is the draw period plus the repayment period, which can range from 15 to 30 years depending on your lender's terms.
  • When the draw period ends, your monthly payment usually increases significantly because you now owe principal payments in addition to interest.
  • Some lenders offer renewal or conversion options when the repayment period begins, though these are not may provide.

What happens during the draw period

During the draw period, you have access to a credit line backed by your home's equity. You can draw money in full, in part, or not at all — the choice is yours. You pay interest only on the amount you've actually borrowed, not on the full credit limit. If your credit line is $100,000 but you've only drawn $30,000, you pay interest on $30,000.

Many borrowers make interest-only payments during this phase, which keeps monthly payments low. However, some lenders require or allow you to pay down principal during the draw period. The longer your draw period, the more time you have to use the credit line for emergencies, home repairs, or other needs. Draw periods of 5 years are common with some banks; others offer 7, 10, or even longer terms.

What changes when the draw period ends

When your draw period ends, you lose the ability to borrow more money. Your HELOC becomes a closed account — you cannot take out additional funds. At the same time, your monthly payment typically jumps because you now owe both principal and interest instead of interest alone.

If you had a $50,000 balance at the end of the draw period and your repayment period is 15 years, your new payment will be much higher than your interest-only payment was. This shock catches many borrowers off guard. Your lender must notify you before the draw period ends, usually 60 to 90 days in advance, so you have time to plan for the increase.

How repayment periods vary by lender

Repayment periods are not standardized. Banks, credit unions, and online lenders each set their own terms. A credit union might offer a 10-year repayment period, while a large bank offers 20 years. Longer repayment periods mean lower monthly payments but more total interest paid over the life of the loan. Shorter repayment periods mean higher monthly payments but less interest overall.

When comparing HELOCs, ask about both the draw period length and the repayment period length. A HELOC with a long draw period but a short repayment period can create a steep payment increase when the draw period ends. Conversely, a shorter draw period with a longer repayment period spreads your payments out but gives you less time to borrow.

What happens if you cannot pay when the repayment period begins

If your balance is still high when the repayment period starts and you cannot afford the new payment, you have limited options. Some lenders allow you to convert your HELOC to a fixed-rate home equity loan, which locks in your payment for the remaining term. Others may allow you to renew the HELOC for another draw and repayment cycle, though this is not may provide and depends on your credit and home equity at that time.

If neither option is available and you cannot pay, your lender can foreclose on your home because the HELOC is secured by your house. This is why it is important to understand your payment obligations before the draw period ends and to plan for the increase. Some borrowers use the draw period to pay down their balance so the repayment period payment is manageable.

Early payoff and variable interest rates

You can pay off a HELOC early at any time without penalty — most HELOCs do not charge prepayment fees. Paying off early saves you interest and frees up your home equity. However, most HELOCs carry variable interest rates, which means your payment can change if the prime rate changes. During the draw period, a rate increase raises your interest-only payment. During the repayment period, a rate increase raises both your principal and interest payment.

Some lenders offer fixed-rate options for part or all of your HELOC balance, which locks your rate for a set time. This protects you from payment increases but usually comes with a slightly higher rate than the variable option. Understanding whether your rate is fixed or variable is essential to predicting what your payment will be when the draw period ends.

Planning ahead for the transition

The best time to prepare for the end of your draw period is years before it happens. Review your loan documents now to confirm when your draw period ends and what your repayment period will be. Use an online calculator to estimate what your payment will be when the repayment period begins. If the number surprises you, consider paying down your balance during the draw period so the jump is smaller.

About 60 to 90 days before your draw period ends, your lender will send you a notice with your new payment amount and your options. At that point, you can ask about conversion to a fixed-rate loan or renewal of the HELOC, if available. Having a plan before that notice arrives means you will not be caught off guard by a payment you cannot afford.

Frequently Asked Questions

Can I extend my draw period if I still need to borrow?

No, the draw period end date is set when you open the HELOC and cannot be extended. However, some lenders allow you to renew the HELOC for another cycle when the repayment period begins, which would give you another draw period. Renewal is not may provide and depends on your credit, income, and home equity at that time.

What if I pay off my HELOC before the draw period ends?

You can pay off the full balance at any time without penalty. Once paid off, the account closes and you lose access to the credit line. If you think you might need the money again later, you could pay it down slowly instead of paying it off completely, keeping the line available during the draw period.

Do all HELOCs have the same draw and repayment period lengths?

No. Draw periods range from 5 to 10 years or longer depending on the lender. Repayment periods range from 10 to 20 years. When comparing HELOCs, always ask for both dates so you know the total length and when your payment will increase.

What happens to my interest rate when the repayment period starts?

Your rate does not automatically change just because the repayment period begins. However, most HELOCs have variable rates tied to the prime rate, so your rate can change at any time based on market conditions. Some lenders let you lock in a fixed rate during the repayment period, though this usually costs more than the variable rate.

Can my lender force me to pay off the HELOC when the draw period ends?

No, your lender cannot force you to pay off the balance. However, you must begin making principal and interest payments instead of interest-only payments. If you cannot afford the new payment, contact your lender to discuss options like conversion to a fixed-rate loan or a renewal, if available.