HELOC repayment works differently than a mortgage — you pay interest-only during the draw period, then principal and interest during the repayment period

A HELOC (home equity line of credit) has two phases. During the draw period, which typically lasts 5 to 10 years, you can borrow money as needed and pay only the interest on what you've borrowed. Once the draw period ends, the repayment period begins — usually lasting 10 to 20 years — and you must pay back both principal and interest on the full balance, whether you've used all the credit or not.

Your monthly payment during the draw period can be as low as the interest alone, which is why many homeowners use a HELOC for ongoing expenses. But this also means your balance doesn't shrink unless you choose to pay down principal. When the repayment period starts, your payment jumps significantly because you're now paying back what you borrowed.

The interest rate on a HELOC is usually variable, tied to the prime rate, so your payment can change if rates rise. Some lenders offer a fixed-rate option for part or all of the balance, which locks in your payment for that portion.

Key Takeaways

  • During the draw period you pay interest only on borrowed funds, but during repayment you must pay principal and interest on the full balance.
  • Your payment can increase sharply when the draw period ends, sometimes doubling or more depending on how much you borrowed.
  • Most HELOCs have variable rates that move with the prime rate, so your payment can change monthly or quarterly.
  • If you stop paying, the lender can freeze your credit line and eventually foreclose on your home, since the HELOC is secured by your house.
  • Paying down principal during the draw period reduces what you owe when repayment begins and can lower your total interest cost.

What your payment covers during the draw period

During the draw period, your minimum payment is usually just the interest on the amount you've borrowed. If you have a $50,000 HELOC with a 7% interest rate and you've drawn $20,000, your monthly interest-only payment would be roughly $117 (7% of $20,000 divided by 12 months). You're not paying down the $20,000 at all — you're only covering the cost of borrowing it.

Some lenders require you to pay a small amount of principal each month, but most allow interest-only payments. This flexibility is why people use HELOCs for home repairs, education, or other expenses they're paying for over time. The catch is that your balance stays the same or grows if you keep borrowing.

If your HELOC has a variable rate, your payment changes when the prime rate changes. If rates go up 1%, your payment on that same $20,000 would jump to about $134 per month. This is one reason some homeowners lock in a fixed rate for at least part of their balance.

The payment shock when the draw period ends

When your draw period ends, your lender stops letting you borrow more money and starts requiring you to pay back everything you owe. Your payment structure changes from interest-only to principal-plus-interest, and the difference can be steep.

Say you borrowed $50,000 during your draw period and paid only interest for 10 years. You still owe the full $50,000. Now your lender gives you 15 years to pay it back. At 7% interest, your new monthly payment would be around $450 — compared to the $292 you were paying in interest alone. That's a 54% jump in your monthly obligation, and it happens on a fixed date whether you're ready or not.

This is why it's important to understand your HELOC terms before you sign. Ask your lender for a sample amortization schedule showing what your payment will be when repayment begins. Some homeowners refinance into a home equity loan or a new mortgage before the shock hits, but that requires may have access to for new financing and paying closing costs.

How to make payments and manage your balance

You make HELOC payments to your lender, usually by automatic bank transfer, check, or online bill pay — the same ways you'd pay any loan. Most lenders let you set up automatic payments so you don't miss a due date. Your monthly statement shows how much interest you owe, how much principal you've paid (if any), and your current balance.

During the draw period, you can pay more than the minimum to reduce your balance. Every extra dollar you pay toward principal lowers the amount you'll owe when repayment begins. If you paid $200 extra per month on that $50,000 HELOC over 10 years, you'd owe roughly $26,000 instead of $50,000 when the draw period ends — and your repayment-period payment would be about $245 instead of $450.

Some lenders charge a fee if you pay off your HELOC early, though this is less common than it used to be. Check your agreement before you sign, and ask whether there's a penalty for paying down the balance faster.

What happens if you miss a payment or stop paying

Missing a HELOC payment has the same consequences as missing any loan payment. Your lender reports it to the credit bureaus after 30 days, which damages your credit score. After 60 days, you'll likely face late fees. After 120 days of non-payment, most lenders freeze your credit line, meaning you can't borrow any more money.

If you continue not paying, the lender can declare the entire balance due immediately (called acceleration) and begin foreclosure proceedings. Because a HELOC is secured by your home — it's a second mortgage — the lender has the right to foreclose if you don't pay. This is different from unsecured debt like credit cards, where the lender can sue you but can't take your house.

If you're struggling to pay, contact your lender before you miss a payment. Some lenders offer forbearance (a temporary pause on payments), a modified payment plan, or a conversion to a fixed-rate loan. These options are easier to arrange before you fall behind.

Refinancing or paying off your HELOC early

If you want to get out of your HELOC before the repayment period begins, or if rates have risen and your payments are too high, you have a few options. You can refinance the HELOC into a home equity loan (a fixed-rate, fixed-term loan) or roll the balance into a new mortgage. Both require a new application and closing costs, but they lock in your rate and give you a clear payoff date.

You can also pay off the HELOC in full using savings, a bonus, or proceeds from selling something. This eliminates the debt entirely and removes the risk of a payment shock or foreclosure. The trade-off is that you lose access to the credit line if you need it later.

If you're in the repayment period and your rate is variable, a refinance into a fixed-rate loan protects you from future rate increases. Shop around with at least three lenders — rates and closing costs vary, and a lower rate might offset the cost of refinancing.

Understanding variable vs. fixed rates on your HELOC

Most HELOCs start with a variable rate tied to the prime rate plus a margin set by your lender. When the prime rate moves, your rate and payment move with it. This is why your payment can change month to month or quarter to quarter, depending on your lender's adjustment schedule.

Some lenders let you convert part or all of your HELOC balance to a fixed rate, locking in your payment for that portion. A fixed rate is usually higher than the current variable rate, but it protects you if rates rise. If you have $30,000 borrowed and you lock $20,000 at a fixed rate, you'll pay a fixed payment on that $20,000 and a variable payment on the remaining $10,000.

During periods of rising rates, a fixed-rate conversion can save you money and make budgeting easier. During periods of falling rates, you'd be paying more than you would with a variable rate. Consider your own situation: if you're on a tight budget, fixed-rate stability might be worth the higher rate. If you can absorb payment changes, variable rates are usually cheaper over time.

Frequently Asked Questions

Can I just pay interest during the repayment period?

No. During repayment, your lender requires you to pay principal plus interest on a set schedule. You can't go back to interest-only payments. Some lenders offer a new HELOC or a conversion option, but that's a separate product with its own terms and approval process.

What if I can't afford my payment when the draw period ends?

Contact your lender before the draw period ends to discuss your options. Some lenders will refinance you into a longer-term loan to lower the payment, or convert you to a fixed-rate loan. If you wait until you miss a payment, your options narrow and your credit suffers. Acting early gives you more choices.

Does paying off my HELOC early hurt my credit score?

Paying off a loan early doesn't hurt your score — it actually shows you can manage debt responsibly. Your score might dip slightly when the account closes because you have less active credit, but it recovers quickly. The benefit of eliminating the debt outweighs any temporary score change.

Can my lender freeze my HELOC during the draw period?

Yes. If your credit score drops significantly, you miss payments, or your home value falls sharply, your lender can freeze your line and stop letting you borrow. They can't force you to repay immediately unless you default, but you lose access to the credit. This is why maintaining good payment history and monitoring your credit matters.

What's the difference between paying off my HELOC and refinancing it?

Paying off means using cash or another source to eliminate the debt entirely — you owe nothing and have no monthly payment. Refinancing means replacing the HELOC with a different loan (usually a home equity loan or mortgage) that has different terms. Refinancing keeps you in debt but might lower your rate or payment. Choose payoff if you can afford it; refinance if you need to spread payments over more time.