HELOC repayment has two distinct phases, and how much you owe depends on which one you're in

A HELOC (Home Equity Line of Credit) works like a credit card backed by your home's equity. You borrow money during the draw period — typically 5 to 10 years — and then enter a repayment period that lasts 10 to 20 years. During the draw period, you can borrow and repay repeatedly. Once the draw period ends, you stop borrowing and begin paying back what you owe, usually in monthly installments.

The amount you pay each month depends on which phase you're in and how your lender structures the loan. Some HELOCs let you pay interest-only during the draw period, which keeps monthly payments low but means you're not reducing what you owe. Others require you to pay principal and interest from the start. When the repayment period begins, almost all HELOCs shift to principal-and-interest payments, and your monthly bill typically rises.

Key Takeaways

  • During the draw period, you can borrow up to your credit limit and make interest-only or minimum payments; during repayment, you must pay back the full balance in fixed monthly installments.
  • Interest rates on HELOCs are variable, meaning your monthly payment can increase or decrease when the lender's rate changes, usually tied to the prime rate.
  • When the draw period ends and repayment begins, your monthly payment often jumps significantly because you're now paying principal and interest instead of interest alone.
  • If you cannot afford the repayment phase payment, you may be able to refinance into a new HELOC or home equity loan, but this extends your debt and costs more in interest.
  • Missing HELOC payments can damage your credit score and may lead to foreclosure, since the line of credit is secured by your home.

What happens during the draw period

During the draw period, you have access to a pool of money — your credit limit — and you can borrow and repay it as often as you want, similar to a credit card. You only pay interest on the amount you've actually borrowed, not on the full credit limit. If your credit limit is $50,000 but you've only drawn $20,000, you pay interest only on that $20,000.

Many lenders allow you to make interest-only payments during this phase. If you borrow $20,000 at 7% interest, an interest-only payment might be around $117 per month. You're not reducing the $20,000 balance — you're just paying the cost of borrowing it. Some HELOCs require you to pay at least some principal each month, but interest-only is common and keeps payments low while you're actively using the line.

The draw period typically lasts 5 to 10 years, though some lenders offer longer or shorter terms. During this time, your interest rate is usually variable, meaning it changes when the lender's benchmark rate (often the prime rate) changes. If rates rise, your monthly payment rises. If rates fall, your payment falls.

What changes when the repayment period begins

When the draw period ends, you stop being able to borrow. The lender freezes your credit line, and you enter the repayment period. At this point, your monthly payment usually increases sharply because you're no longer paying interest-only — you're now paying both principal and interest in a fixed monthly amount.

Using the earlier example: if you owe $20,000 at the start of repayment and the repayment period is 10 years, your monthly payment might jump from $117 (interest-only) to around $237 (principal and interest combined). The exact amount depends on your interest rate at that time, which may be different from the rate during the draw period.

Some HELOCs convert to a fixed rate during repayment, which means your payment stays the same for the rest of the loan term. Others remain variable, so your payment can still change if interest rates move. Check your loan documents or call your lender to find out which applies to you.

How variable interest rates affect your payments

Most HELOCs carry a variable interest rate, usually expressed as the prime rate plus a margin set by your lender. If the prime rate is 8% and your margin is 1%, your rate is 9%. When the Federal Reserve raises or lowers the prime rate, your HELOC rate changes, typically within one to two billing cycles.

When your rate increases, your monthly payment increases — even if you haven't borrowed any additional money. When your rate decreases, your payment decreases. This unpredictability can make budgeting difficult, especially during the repayment period when you're already paying principal and interest.

Some HELOCs include a rate cap, which sets a maximum rate your lender can charge. For example, a cap of 12% means your rate can never go above 12%, no matter how high the prime rate climbs. Check your loan documents for any caps or floors (a minimum rate) that apply to your line.

Minimum payments versus paying off the balance

During the draw period, your lender sets a minimum payment — often interest-only or a small percentage of your balance. You can pay more than the minimum at any time without penalty. Paying more than the minimum reduces your balance faster and saves you money in interest over the life of the loan.

During the repayment period, the minimum payment is calculated to pay off your entire balance by the end of the term. If you only make the minimum payment, you'll owe nothing when the repayment period ends. However, if you want to pay off the balance faster, you can make larger payments, and most lenders do not charge prepayment penalties.

Some borrowers use the draw period to pay down their balance aggressively, then enter repayment with a smaller amount owed. This reduces the payment shock when the draw period ends. Others borrow heavily during the draw period and face a steep payment increase when repayment begins.

What to do if you cannot afford the repayment payment

If your monthly payment jumps at the start of repayment and you cannot afford it, you have a few options. The first is to refinance your HELOC into a new HELOC with a longer draw period, which delays the repayment phase and keeps payments lower for a few more years. However, this extends your total debt timeline and costs more in interest.

A second option is to refinance into a home equity loan, which is a fixed-rate loan that replaces your HELOC. This converts your variable-rate debt into a fixed payment you can count on, though the interest rate may be higher than your current HELOC rate. A third option is to refinance into a cash-out mortgage, which replaces your primary mortgage and HELOC with a single new mortgage. This is usually only practical if mortgage rates are favorable.

If you're struggling with payments, contact your lender before you miss a payment. Some lenders offer temporary forbearance or payment reduction programs. Missing HELOC payments damages your credit score and can lead to foreclosure, since your home secures the debt.

How interest is calculated and when payments are due

HELOC interest is calculated daily based on your outstanding balance and your current interest rate. If you borrow $10,000 on the first of the month and repay $5,000 on the 15th, you pay interest on $10,000 for 14 days and $5,000 for the remaining days of the month. Your monthly statement shows the interest charged and the principal balance.

Payments are typically due on the same day each month. If you miss a payment, most lenders charge a late fee and report the missed payment to credit bureaus after 30 days. Some lenders offer automatic payment setup, which deducts your payment from your bank account on a date you choose, reducing the risk of missing a due date.

Frequently Asked Questions

What happens if I don't pay anything during the draw period?

If you make no payments during the draw period, your balance grows and interest accrues. When the repayment period begins, you'll owe the full amount you borrowed plus all the accumulated interest, and your monthly payment will be very high. Most lenders require at least interest-only payments to prevent this scenario.

Can I extend the repayment period if I can't pay it off in time?

Some lenders allow you to refinance into a new HELOC or home equity loan that extends the payoff timeline. However, this is not automatic — you must request it and may have access to based on your income and credit. Extending the timeline costs more in total interest.

What if interest rates drop during my repayment period?

If your HELOC has a variable rate, a drop in interest rates lowers your monthly payment. If your HELOC converted to a fixed rate at the start of repayment, your payment stays the same regardless of what happens to market rates.

Do I have to pay off the entire HELOC balance by the end of the repayment period?

Yes. The repayment period is structured so that if you make the required monthly payment, your balance reaches zero when the term ends. If you want to keep the debt longer, you must refinance before the repayment period ends.

Can I borrow again after the draw period ends?

No. Once the draw period ends, your credit line is frozen and you cannot borrow additional money. If you want access to a new line of credit, you must open a new HELOC or home equity loan, which requires a new application and appraisal.