By Mo Abdel, NMLS #1426884 | Published February 26, 2026
The bottom line: A HELOC operates in two distinct phases. During the draw period (5–10 years), you can borrow up to your credit limit and make interest-only minimum payments. During the repayment period (10–20 years), you repay the outstanding balance with fully amortizing principal-and-interest payments. On a $200,000 HELOC balance at 8.5%, monthly payments jump from approximately $1,417 (interest-only) to $2,089 (15-year amortization) — a 47% increase that catches many borrowers off guard.
| Feature | Draw Period | Repayment Period |
|---|---|---|
| Typical Duration | 5–10 years | 10–20 years |
| Access to Funds | Yes, up to credit limit | No — line is frozen |
| Minimum Payment Type | Interest-only (most lenders) | Full principal & interest |
| Rate Structure | Variable (prime + margin) | Variable (prime + margin) |
| Can Repay & Re-borrow | Yes — revolving credit | No — pay down only |
| Prepayment Penalty | Rare (check your terms) | Rare (check your terms) |
Quick Answer: HELOC Draw Period vs Repayment Period
- Draw period (5–10 years): Access funds via checks, debit card, or online transfer; make interest-only minimums
- Repayment period (10–20 years): No more draws; pay fully amortizing principal & interest monthly
- Payment increase: Monthly payments typically rise 50–200% when repayment begins
- Rate type: Variable rate (prime + margin) applies in both phases
- Strategies: Pay principal during draw period, refinance, convert to fixed rate, or request renewal
- Lender notification: Most lenders notify you 6–12 months before the draw period ends
| HELOC Balance | Interest-Only Payment (8.5%) | P&I Payment (15-yr) | Payment Increase |
|---|---|---|---|
| $100,000 | $708 | $1,044 | +47% ($336) |
| $200,000 | $1,417 | $2,089 | +47% ($672) |
| $300,000 | $2,125 | $3,133 | +47% ($1,008) |
| $500,000 | $3,542 | $5,222 | +47% ($1,680) |
How Does the HELOC Draw Period Work?
The draw period is the first phase of your HELOC and represents the time during which you can access funds. Most lenders set the draw period at 10 years, though some offer 5-year or 15-year draw periods depending on the product. During this phase, your HELOC functions as a revolving line of credit — similar to a credit card, but secured by your home and offered at significantly lower interest rates.
As a wholesale mortgage broker processing HELOC applications across 200+ lenders, I see draw period structures that vary meaningfully between institutions. Some credit unions offer 15-year draw periods that give borrowers extra flexibility, while certain banks limit draw periods to just 5 years. The draw period length directly impacts your financial planning horizon, so selecting the right structure from the start matters.
How to Access HELOC Funds During the Draw Period
Lenders provide multiple access methods during the draw period. The specific methods available depend on your lender, and not all institutions offer every option:
- Special HELOC checks: Write checks drawn directly against your credit line for contractor payments, large purchases, or transfers
- Dedicated debit card: Some lenders issue a Visa or Mastercard debit card linked to your HELOC for point-of-sale transactions
- Online transfer: Move funds electronically from your HELOC to your checking or savings account, typically within 1–2 business days
- Wire transfer: Request wire transfers for same-day funding, commonly used for real estate transactions or time-sensitive payments
- Phone request: Call your lender to initiate a draw by phone, with funds deposited into your linked account
Interest-Only vs Principal & Interest Payments During the Draw Period
Most HELOCs require only interest-only minimum payments during the draw period. This keeps your monthly obligation low but does not reduce your balance. Some lenders offer the option to make principal-and-interest payments during the draw period, and a few lenders require it.
| Payment Type | How It Works | Balance Impact | Monthly Cost ($200K at 8.5%) |
|---|---|---|---|
| Interest-Only (minimum) | Pay only accrued interest each month | Balance stays the same | $1,417/mo |
| Interest + Extra Principal | Pay interest plus additional toward principal | Balance decreases over time | $1,917+/mo (example) |
| Full P&I (some lenders require) | Amortized principal and interest from day one | Balance decreases on schedule | $2,089/mo (15-yr amort.) |
Important:
Making only interest-only payments during the entire 10-year draw period means your full balance remains when the repayment period begins. If you drew $200,000, you still owe $200,000 when repayment starts. Planning ahead by paying down principal during the draw period is the single most effective way to reduce payment shock.
What Happens When the Draw Period Ends?
The transition from draw period to repayment period is one of the most significant financial events in a HELOC's lifecycle. Most lenders send a formal notification 6 to 12 months before your draw period expires, giving you time to prepare. Here is what changes:
- Access to funds stops: You can no longer draw from the credit line. The revolving feature ends completely, and your remaining available credit disappears.
- Payment type changes: Your monthly payment shifts from interest-only to fully amortizing principal and interest. The lender calculates a new payment that will pay off your entire outstanding balance over the repayment term.
- Payment amount increases: Because you are now paying principal in addition to interest, your monthly payment increases significantly. The increase depends on your balance, rate, and repayment term length.
- Remaining term shortens your amortization: If your HELOC has a 30-year total term (10-year draw + 20-year repayment), the balance amortizes over 20 years. If the total term is 25 years (10-year draw + 15-year repayment), the shorter amortization means higher monthly payments.
How Does HELOC Payment Shock Affect Borrowers?
Payment shock is the sudden increase in monthly payments that occurs when a HELOC transitions from the draw period to the repayment period. According to the Consumer Financial Protection Bureau (CFPB), payment shock is one of the primary risks associated with HELOCs and a leading cause of borrower financial distress.
The magnitude of payment shock depends on three factors: your outstanding balance at the end of the draw period, the interest rate at that time, and the length of the repayment period. A borrower who maintained a large balance throughout the draw period with interest-only payments faces the largest shock.
| Balance at End of Draw | I/O Payment (8.5%) | P&I 10-yr Repay | P&I 15-yr Repay | P&I 20-yr Repay |
|---|---|---|---|---|
| $100,000 | $708 | $1,240 | $1,044 | $955 |
| $200,000 | $1,417 | $2,480 | $2,089 | $1,911 |
| $350,000 | $2,479 | $4,340 | $3,655 | $3,344 |
| $500,000 | $3,542 | $6,200 | $5,222 | $4,776 |
How Does the Variable Rate Structure Affect Both HELOC Phases?
Understanding how your HELOC rate adjusts is critical because rate changes affect your payments in both the draw period and the repayment period. Nearly all HELOCs carry a variable rate tied to the prime rate, which is set by the Federal Reserve and published by the Wall Street Journal.
How the Rate Formula Works
Your HELOC Rate = Prime Rate + Lender Margin
Example: Prime Rate (8.50%) + Margin (0.50%) = 9.00% HELOC Rate
When the Fed cuts rates by 0.25%:
New Prime Rate (8.25%) + Margin (0.50%) = 8.75% HELOC Rate
When the Fed raises rates by 0.25%:
New Prime Rate (8.75%) + Margin (0.50%) = 9.25% HELOC Rate
The margin is set by your lender at origination and typically remains fixed for the life of the HELOC. Margins range from 0% to 2% or more depending on your credit profile, loan-to-value ratio, and the lender's pricing. A lower margin translates to a lower rate in every interest rate environment, which is why shopping margin across multiple lenders matters as much as comparing the initial rate.
Rate Caps and Floors
Most HELOCs include rate protections that limit how high or low your rate can go:
- Lifetime cap: The maximum rate your HELOC can reach over the life of the loan, typically 18–21% in California and Washington
- Rate floor: The minimum rate the lender will charge, usually set at the initial margin or a stated minimum (often 3–5%)
- Periodic cap: Some HELOCs limit how much the rate can change per adjustment period, though many HELOCs adjust without periodic caps
What Strategies Prepare You for the Repayment Period Transition?
Proactive planning during the draw period dramatically reduces the financial impact of the transition. Here are the five most effective strategies I recommend to borrowers:
Strategy 1: Make Principal Payments During the Draw Period
The most straightforward approach is to voluntarily pay down principal during the draw period, even though your lender only requires interest-only payments. Every dollar of principal you pay during the draw period reduces your balance at transition and lowers your repayment period payment.
Example: The Impact of $500/Month Extra Principal
On a $200,000 HELOC, paying an extra $500/month toward principal during a 10-year draw period reduces your balance by approximately $60,000 before the repayment period starts. Your remaining $140,000 balance then amortizes at $1,462/month over 15 years instead of $2,089/month — saving you $627/month and over $52,000 in total interest.
Strategy 2: Refinance Before the Repayment Period Begins
If your draw period is ending within the next 12–18 months, refinancing into a new product can reset the clock or improve your terms. Options include:
- New HELOC: Open a new HELOC with a fresh 10-year draw period, using it to pay off the existing HELOC
- Fixed-rate home equity loan (HELOAN): Convert your variable-rate HELOC balance to a fixed-rate home equity loan with predictable payments
- Cash-out refinance: Roll your HELOC balance into a new first mortgage via cash-out refinance, especially if current first mortgage rates are favorable
Strategy 3: Request a HELOC Renewal or Extension
Some lenders allow you to renew your HELOC, which restarts the draw period for another term. Renewal typically requires a new application, updated credit review, and a current appraisal or valuation. Not all lenders offer renewal, and your terms may change based on current market conditions and your credit profile.
Strategy 4: Convert to a Fixed Rate During the Draw Period
Many HELOCs offer a fixed-rate conversion feature that allows you to lock a fixed rate on all or a portion of your outstanding balance. This converts part of your variable-rate line into a fixed-rate installment loan within the same HELOC structure. The unconverted portion remains as a variable-rate revolving line you can continue to draw from.
Strategy 5: Gradually Pay Down Balance Over the Final 2–3 Years
If you cannot afford large extra payments, start a gradual paydown plan 2–3 years before the draw period ends. Even modest additional principal payments of $200–$300 per month over 36 months can reduce your balance by $7,200–$10,800, meaningfully softening the transition.
HELOC vs Home Equity Loan: Choosing the Right Structure
Understanding the HELOC vs home equity loan comparison is essential because a HELOAN eliminates the two-phase complexity entirely. Here is how the structures compare for different use cases:
| Scenario | HELOC (Draw + Repayment) | HELOAN (Fixed from Day 1) | Recommendation |
|---|---|---|---|
| Home renovation (phased over 2 years) | Draw funds as each phase begins; pay interest only on amount drawn | Receive full amount upfront; pay P&I on entire balance immediately | HELOC |
| One-time debt consolidation ($80K) | Draw full amount at once; variable rate risk | Fixed rate, fixed payment from day one | HELOAN |
| Emergency fund / safety net | Available credit line; pay nothing unless drawn | Must take lump sum and start paying immediately | HELOC |
| Known college tuition ($120K over 4 years) | Draw each semester; interest-only during school years | Full amount upfront; pay P&I from day one | HELOC |
| Fixed amount for investment property down payment | Draw once; variable rate until fully repaid | Fixed rate, predictable 15-year payoff | HELOAN |
How Does a Wholesale Broker Find Better HELOC Terms?
The HELOC market has significant variation in draw period length, repayment terms, renewal options, and fixed-rate conversion features. Retail banks typically offer a single HELOC product with fixed terms. A wholesale mortgage broker accesses 200+ lenders, each with different HELOC structures, enabling a customized match to your financial goals.
| HELOC Feature | Typical Retail Bank | Wholesale Broker Access |
|---|---|---|
| Draw Period Options | 10 years (one option) | 5, 10, or 15 years |
| Repayment Period Options | 20 years (one option) | 10, 15, or 20 years |
| Fixed-Rate Conversion | Not always available | Available from select lenders |
| Renewal / Extension | Rarely offered | Available from select lenders |
| Max CLTV | 80% | Up to 90% (select lenders) |
| Margin Range | Bank's standard margin | Competitive margins across 200+ lenders |
People Also Ask: HELOC Draw Period & Repayment Period
Can I still use my HELOC during the repayment period?
No. Once the repayment period begins, your line is frozen and you can only make payments to reduce the balance. If you need ongoing access to funds, refinance into a new HELOC before the draw period ends or ask your lender about renewal options.
How is the repayment period payment calculated?
Your lender amortizes the outstanding balance over the remaining repayment term at your current variable rate. The calculation uses the standard amortization formula, producing a fixed principal-and-interest payment that adjusts when the variable rate changes. Most lenders recalculate the payment monthly or quarterly.
What if I cannot afford the repayment period payment?
Contact your lender immediately to discuss modification, refinance, or extension options before missing payments. Options include refinancing into a new HELOC, converting to a longer-term home equity loan, or negotiating a loan modification. Missing payments triggers late fees and credit damage.
Do all HELOCs have interest-only draw periods?
Most HELOCs offer interest-only minimums during the draw period, but some lenders require principal-and-interest payments from day one. P&I draw period HELOCs have higher monthly payments during the draw phase but result in a lower balance at transition and minimal payment shock.
Can I close my HELOC early during the draw period?
Yes, you can close your HELOC at any time by paying off the outstanding balance in full. Some lenders charge an early closure fee (typically $300–$500) if you close within the first 2–3 years. After that period, most HELOCs have no early termination fee.
Is a HELOC or cash-out refinance better for avoiding payment shock?
A cash-out refinance provides fixed payments from day one, eliminating the draw-to-repayment transition entirely. However, it replaces your entire first mortgage, which may not make sense if you have a favorable existing rate. Read more in our HELOC vs cash-out refinance comparison.
How far in advance will my lender notify me before the draw period ends?
Most lenders send notification 6 to 12 months before the draw period ends, as required by federal disclosure regulations. The notification details your current balance, projected repayment period payment, and new terms. Mark this date on your calendar and start planning 18–24 months before the transition.
Does my HELOC rate change when I enter the repayment period?
The rate formula (prime + margin) stays the same in both phases, but some lenders add a higher margin during the repayment period. Review your HELOC agreement carefully to check whether the margin increases at transition. If it does, refinancing before the transition may save you money.
Frequently Asked Questions: HELOC Draw Period & Repayment Period
What is the typical length of a HELOC draw period?
Most HELOC draw periods last 10 years, though some lenders offer 5-year or 15-year draw periods. During this phase you can access funds as needed up to your credit limit while making interest-only minimum payments. Wholesale brokers access lenders with varying draw period lengths to match your timeline.
What happens when my HELOC draw period ends?
When the draw period ends, you enter the repayment period and can no longer access additional funds. Your payment changes from interest-only to fully amortizing principal and interest over the remaining term. Most lenders send notification 6-12 months before the transition so you have time to prepare.
How much will my HELOC payment increase during the repayment period?
HELOC payments typically increase 50% to 200% when the repayment period begins because you start paying principal in addition to interest. On a $200,000 balance at 8.5%, payments jump from approximately $1,417 interest-only to $2,089 fully amortizing over 15 years. The exact increase depends on balance, rate, and repayment term.
Can I make principal payments during the HELOC draw period?
Yes, you can make principal payments at any time during the draw period with no prepayment penalty on most HELOCs. Paying down principal during the draw period reduces your balance, lowers future repayment period payments, and saves significant interest over the life of the loan. This is one of the most effective strategies to avoid payment shock.
Can I refinance my HELOC before the repayment period starts?
Yes, refinancing before the repayment period is a common strategy. You can refinance into a new HELOC with a fresh draw period, consolidate into a fixed-rate home equity loan, or roll the balance into a cash-out refinance. A wholesale broker can compare options from 200+ lenders to find the most competitive terms available.
How does a HELOC variable rate work during each phase?
HELOC rates are tied to the prime rate plus a margin set by your lender. This variable rate applies during both the draw period and repayment period. When the Federal Reserve raises or lowers the federal funds rate, prime rate adjusts, and your HELOC rate changes accordingly. Some HELOCs have rate caps that limit maximum increases.
Can I convert my HELOC to a fixed rate during the draw period?
Many lenders offer a fixed-rate conversion feature that lets you lock a fixed rate on all or part of your outstanding balance during the draw period. This protects against rising rates while maintaining revolving access to unconverted funds. Not all lenders offer this feature, so confirm availability before applying.
What is the difference between a HELOC draw period and a HELOAN?
A HELOC draw period provides revolving access to funds up to your limit with interest-only minimums, similar to a credit card. A HELOAN (home equity loan) provides a single lump sum with fixed-rate, fully amortizing payments from day one. HELOCs suit ongoing or unpredictable expenses while HELOANs suit known, one-time costs.
Can I renew or extend my HELOC draw period?
Some lenders allow HELOC renewal or extension, which restarts the draw period for another term. This typically requires a new credit review, updated appraisal, and meeting current underwriting guidelines. Not all lenders offer renewal, and terms may change from the original HELOC. A wholesale broker can find lenders with renewal-friendly policies.
What are the access methods during the HELOC draw period?
During the draw period, you can access HELOC funds through multiple methods: special checks linked to the credit line, a dedicated debit card, online transfers to your bank account, wire transfers, and sometimes in-person branch withdrawals. Each lender offers different access options, so confirm which methods are available when you apply.
Is there a minimum draw amount on a HELOC?
Most HELOCs require a minimum initial draw at closing, typically $5,000 to $25,000 depending on the lender. After the initial draw, subsequent draws may have minimums of $250 to $500. Some lenders have no minimum for subsequent draws. Your lender will specify all minimum draw requirements in your closing documents.
What happens to my HELOC if I sell my house during the draw period?
If you sell your home during the draw period, the outstanding HELOC balance must be paid off at closing from the sale proceeds, along with your first mortgage. Any remaining equity after paying both loans goes to you. You cannot transfer a HELOC to a new property because the line is secured by the specific property.
Expert Summary: Navigating the HELOC Two-Phase Structure
The HELOC draw period repayment period structure creates both opportunity and risk for homeowners. The draw period's interest-only flexibility keeps payments low and gives you revolving access to your equity. The repayment period's fully amortizing payments ensure the balance gets paid off but can create significant payment shock for unprepared borrowers.
The borrowers who navigate this structure most successfully are those who treat the draw period strategically: they make voluntary principal payments, monitor their variable rate, and start planning for the repayment transition 18–24 months before it arrives. Whether you choose to pay down the balance gradually, refinance into a new product, convert to a fixed rate, or request a renewal, the key is taking action well before the draw period expires.
As a wholesale mortgage broker, I help clients select HELOCs with the draw period length, repayment terms, and features that align with their financial timeline. With access to 200+ lenders, I compare draw periods from 5 to 15 years, repayment terms from 10 to 20 years, and identify lenders that offer fixed-rate conversion and renewal options that many retail banks do not provide.
Get Your Free HELOC Comparison
I will compare HELOC draw period lengths, repayment terms, and features from 200+ lenders to find the structure that fits your financial plan.
Mo Abdel | (949) 822-9662
NMLS #1426884 | Lumin Lending NMLS #2716106