HELOC repayment happens in two phases: a draw period when you borrow money, and a repayment period when you pay it back

During the draw period — usually 5 to 10 years — you can withdraw money from your credit line as needed, up to your limit. You make minimum payments on what you've borrowed, often interest-only. When the draw period ends, the repayment period begins, typically lasting 10 to 20 years. At that point, you can no longer draw new money, and your payments jump because you now pay both principal and interest on the full balance you owe.

The exact structure depends on your lender and your HELOC agreement. Some lenders let you choose between interest-only and principal-plus-interest payments during the draw period. Others require principal-plus-interest from the start. When the repayment period begins, nearly all HELOCs switch to principal-plus-interest payments, and your monthly payment can increase significantly — sometimes doubling or tripling.

Key Takeaways

  • During the draw period, you withdraw money as needed and usually pay interest only, keeping payments low.
  • When the draw period ends and the repayment period begins, you stop borrowing and start paying back the full balance with principal and interest.
  • Your payment amount can increase substantially at the start of the repayment period because you shift from interest-only to principal-plus-interest payments.
  • HELOC interest rates are variable, so your payment can change if rates rise, even during the repayment period.
  • Some lenders offer conversion options that let you lock in a fixed rate or extend the repayment timeline before the draw period ends.

What happens during the draw period

The draw period is when you have access to borrowed money. You can withdraw a small amount, a large amount, or nothing at all — it's your choice. You only pay interest on what you actually withdraw, not on your full credit limit. If your HELOC has a $100,000 limit but you only borrow $20,000, you pay interest on $20,000.

During this phase, your lender typically requires a minimum payment that covers the interest accruing on your balance. Some lenders allow you to pay interest-only; others require you to pay some principal as well. The minimum payment is usually much lower than what you'll owe once the repayment period starts. Many borrowers use this time to pay down the balance or leave it untouched, knowing larger payments are coming later.

The draw period length varies. Most HELOCs offer 5 to 10 years, though some stretch to 15 years. Your lender sets this in your agreement, and you cannot extend it unilaterally. Mark your calendar for when your draw period ends — that's when your payment structure changes.

What happens when the draw period ends

When the draw period ends, your HELOC enters the repayment period. You can no longer withdraw new money. Your lender freezes your credit line, and any remaining balance becomes a loan you must repay on a fixed schedule.

Your payment changes because the calculation changes. During the draw period, you might have paid $150 per month on a $20,000 balance at interest-only. Once repayment begins, that same $20,000 must be paid back over 10 to 20 years, depending on your agreement. Your new payment might be $200 to $300 per month — higher because you're now paying principal, not just interest.

If your balance is larger, the jump is steeper. A $50,000 balance that cost $200 per month in interest-only payments might cost $500 to $600 per month during repayment. This shock is why many borrowers get into trouble: they planned for low draw-period payments but didn't budget for the repayment-period jump.

How variable interest rates affect your payments

Most HELOCs carry variable interest rates, meaning your rate can change over time. Your lender ties your rate to a market index — usually the prime rate — plus a margin they set. When the index rises, your rate rises, and your payment rises with it, even if you haven't borrowed any additional money.

During the draw period, rate increases affect your minimum payment. If rates rise 1%, your interest-only payment on a $20,000 balance increases by roughly $200 per year. During the repayment period, rate increases affect both your interest and your principal payment, so the impact is larger.

Some HELOCs include a rate cap — a ceiling above which your rate cannot rise. Others do not. Read your agreement to understand your rate structure. If rates are low when you open your HELOC, plan for the possibility that rates will rise and your payment will follow.

Minimum payments versus paying down the balance faster

Your lender sets a minimum payment, but you can always pay more. During the draw period, paying more than the minimum reduces your balance, which lowers the amount you'll owe when repayment begins. If you pay $300 per month instead of the $150 minimum, you reduce your principal faster and shrink the shock when the draw period ends.

During the repayment period, paying more than the minimum shortens the repayment timeline and reduces total interest paid. If your repayment period is 15 years but you pay extra each month, you might finish in 10 years. The tradeoff is cash flow: extra payments now mean less money available for other expenses.

Some borrowers use their HELOC strategically — they borrow during the draw period to cover a specific expense, then pay it down aggressively before repayment begins. Others treat it as a long-term loan and plan to make regular payments throughout both phases.

Conversion and refinancing options before repayment begins

Before your draw period ends, some lenders offer the option to convert part or all of your HELOC balance to a fixed-rate loan. This locks in your interest rate and lets you know exactly what your payment will be for the rest of the loan term. Conversion protects you if rates are rising.

You can also refinance your HELOC into a different product — a home equity loan, a new HELOC with a different lender, or a cash-out refinance of your mortgage. Refinancing lets you shop for better terms, a longer repayment period, or a fixed rate. The tradeoff is closing costs and a new application process.

Start exploring these options 6 to 12 months before your draw period ends. Lenders often move slowly, and you want time to compare offers. If you wait until the draw period has already ended, your options narrow and your negotiating power weakens.

What to do if you can't afford the repayment-period payment

If your payment jumps beyond what you can afford, contact your lender immediately — do not wait until you miss a payment. Some lenders will work with you to extend the repayment period, lower the payment temporarily, or convert to a fixed rate with different terms. Others will not, but asking costs nothing.

If your lender won't work with you, refinancing is your next option. You can refinance into a home equity loan with a longer term, a new HELOC with a different lender, or a cash-out mortgage refinance. Each option has costs and tradeoffs, but they're worth exploring if your current payment is unsustainable.

If refinancing isn't possible and you fall behind on payments, your lender can foreclose on your home because the HELOC is secured by your house. This is a serious consequence, so address payment problems early.

Frequently Asked Questions

Can I extend my draw period before it ends?

Most lenders do not allow you to extend the draw period unilaterally. However, you can refinance into a new HELOC with a new draw period, or convert your balance to a different product. Contact your lender to ask what options they offer as your draw period approaches.

What if I haven't used my entire credit line during the draw period?

You don't owe anything on the unused portion. When the draw period ends, your credit line closes, and you only repay what you actually borrowed. If you borrowed $15,000 of a $100,000 limit, you repay $15,000 plus interest.

Do I have to make payments during the draw period?

Yes. Your lender requires a minimum payment, even if you've only borrowed a small amount. The minimum is usually interest-only or a small portion of principal plus interest. If you don't make the minimum payment, you default and damage your credit.

Can I pay off my HELOC early without penalty?

Most HELOCs have no prepayment penalty, meaning you can pay off your balance whenever you want. Check your agreement to confirm. Paying early saves you interest and gives you peace of mind before the repayment period begins.

What happens if interest rates drop during my repayment period?

If your HELOC has a variable rate, your payment will decrease when rates drop. You benefit from lower rates automatically. If you want to lock in a rate, you can ask your lender about converting to a fixed-rate loan, though this usually happens during the draw period, not after.