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HELOC Draw Period Explained: What Happens & How to Prepare
Meta Description: A HELOC draw period is typically 10 years of flexible borrowing—but when it ends, your payments can jump significantly. Here's what to expect and how to prepare.
A HELOC isn't like a regular loan where you borrow once and pay it back. It works in two distinct phases—and understanding the difference could save you from a nasty payment surprise down the road.
The draw period is phase one: the years when you can borrow and reborrow against your credit line. The repayment period is phase two: when borrowing stops and you pay down what you owe.
Most people focus on getting the HELOC. Not enough think about what happens 10 years later.
Quick Answer: How Long Is a HELOC Draw Period?
Most HELOCs have a 10-year draw period, though some lenders offer 5-year or 15-year options.
After the draw period ends, you enter the repayment period—typically 10-20 years—during which you repay principal plus interest with no ability to borrow more.
Common HELOC timelines:
- 10-year draw + 20-year repayment = 30-year total term
- 10-year draw + 10-year repayment = 20-year total term
- 5-year draw + 15-year repayment = 20-year total term
Your specific terms depend on your lender. Always check your HELOC agreement for exact dates.
Draw Period vs Repayment Period: Side-by-Side
| Feature | Draw Period | Repayment Period |
|---|---|---|
| Duration | 5-10 years (typically 10) | 10-20 years |
| Can you borrow? | Yes, up to your credit limit | No |
| Payment type | Interest-only (minimum) | Principal + Interest |
| Revolving credit? | Yes—repay and reborrow | No—line is closed |
| Payment amount | Lower | Higher (often much higher) |
Think of the draw period like a credit card: borrow, repay, borrow again. The repayment period is like a fixed loan: pay it off over time, no new borrowing.
Payments During the Draw Period
Most HELOCs require interest-only payments during the draw period. You're only required to pay the interest that accrues each month—not the principal.
What Interest-Only Means
Example:
- HELOC balance: $50,000
- Interest rate: 9% APR
- Monthly interest: $50,000 × 9% ÷ 12 = $375/month
That $375 covers your interest. Your balance stays at $50,000.
You CAN Pay Principal (You're Just Not Required To)
Nothing stops you from paying more than the minimum. Any extra goes toward principal, reducing what you owe.
Why this matters: If you only make minimum payments for 10 years, you'll enter the repayment period owing the full amount—and face a significant payment jump.
Revolving Credit During Draw Period
Unlike a traditional loan, a HELOC lets you borrow, repay, and borrow again during the draw period.
Example:
- Credit limit: $100,000
- You draw $30,000 for a kitchen remodel
- You pay back $10,000
- Available credit: $80,000
- You can draw again up to $80,000
This flexibility is one of a HELOC's biggest advantages. It's also why some people never pay down principal—they keep the balance revolving like a credit card.
What Happens When the Draw Period Ends
Here's where many homeowners get caught off guard.
When your draw period ends:
- Borrowing stops. You can no longer draw from your line of credit.
- Repayment begins. You must start paying back principal plus interest.
- Payments increase. Often significantly—sometimes 50-100% higher.
- Interest rate still varies. Most HELOCs remain variable-rate through repayment.
This transition is often called "payment shock"—and it catches people who haven't planned for it.
Payment Shock: Real Numbers
Let's look at what actually happens to your monthly payment.
Example: $50,000 HELOC at 9% Rate
During Draw Period (interest-only):
- Monthly payment: $375
During Repayment Period (10-year term):
- Monthly payment: $633
- Increase: $258/month (69% higher)
During Repayment Period (20-year term):
- Monthly payment: $450
- Increase: $75/month (20% higher)
Example: $100,000 HELOC at 9% Rate
During Draw Period (interest-only):
- Monthly payment: $750
During Repayment Period (10-year term):
- Monthly payment: $1,267
- Increase: $517/month (69% higher)
During Repayment Period (20-year term):
- Monthly payment: $900
- Increase: $150/month (20% higher)
The Double Whammy: Rising Rates
These examples assume a fixed 9% rate. But HELOC rates are usually variable—tied to prime rate plus a margin.
If rates rise between now and your repayment period, your payment shock could be even worse:
$50,000 balance, rates rise to 11%:
- Draw period payment at 9%: $375
- Repayment period at 11% (10-year): $689
- Total increase: $314/month (84% higher)
This is why financial planners recommend preparing for higher payments before your draw period ends.
Smart Strategies During the Draw Period
Don't wait until the last year to think about repayment. Start now.
1. Pay More Than the Minimum
Even small extra payments reduce your eventual repayment burden.
Example: On a $50,000 balance, paying an extra $200/month for 5 years:
- Principal paid down: ~$12,000
- Balance entering repayment: ~$38,000
- Lower repayment period payment
2. Make Principal Payments When You Can
Got a bonus? Tax refund? Apply it to principal. Your future self will thank you.
3. Track Your Balance Trajectory
Know where you'll be when the draw period ends. If you've been revolving the balance, face that reality now.
Set a calendar reminder for 2 years before your draw period ends. That's your planning window.
4. Budget for Payment Increase Now
Start setting aside the difference between your current interest-only payment and your expected repayment amount. By the time repayment starts, you're already adjusted.
Example: If payments will jump from $375 to $633:
- Difference: $258/month
- Start putting $258/month into savings now
- When repayment starts, you're ready
5. Consider Paying Down Before Repayment Starts
If you have savings, a lump-sum principal payment before repayment starts reduces your monthly obligation.
Options When Your Draw Period Ends
If you're approaching the end of your draw period and worried about payment shock, you have options.
1. Refinance to a New HELOC
Many homeowners refinance into a new HELOC, resetting the clock with a fresh 10-year draw period.
Pros:
- Lower payments continue
- Access to fresh credit line
- May lock in better rate if rates have dropped
Cons:
- Delays principal repayment (you're kicking the can)
- Closing costs on new HELOC
- Need sufficient equity and credit to qualify
Best for: Homeowners who still need flexibility and have strong finances
2. Convert to a Fixed-Rate Loan
Some lenders offer a conversion option—turning your variable HELOC balance into a fixed-rate home equity loan.
Pros:
- Predictable fixed payments
- Protection from rising rates
- Forced principal paydown
Cons:
- May have higher rate than current HELOC
- Lose revolving flexibility
- Not all lenders offer this
Best for: Homeowners who want payment certainty and are done borrowing
3. Request a Draw Period Extension
Some lenders will extend your draw period—though this isn't guaranteed.
Pros:
- Continues interest-only payments
- Maintains borrowing access
Cons:
- Depends on lender discretion
- May require new underwriting
- Still delays principal repayment
Best for: Temporary cash flow issues with a clear improvement timeline
4. Pay It Off
If you have the means, paying off your HELOC balance before or during the repayment period is the cleanest solution.
Use windfalls, downsize expenses, or accelerate payments to eliminate the balance. No payment shock if there's no balance.
5. Sell Your Home
If payment shock is unmanageable and other options don't work, selling the home pays off both your mortgage and HELOC.
This is obviously a significant life decision—but for some homeowners facing financial hardship, it's the responsible choice.
Frequently Asked Questions
How long is a typical HELOC draw period?
Most HELOCs have a 10-year draw period, though 5-year and 15-year options exist. After the draw period, you enter a repayment period (typically 10-20 years) where you pay back principal plus interest.
What payments do I make during the draw period?
Most HELOCs require interest-only payments during the draw period. You pay only the interest that accrues—your principal balance doesn't decrease unless you choose to pay extra.
Can I extend my HELOC draw period?
Possibly. Some lenders allow extensions or will refinance you into a new HELOC. This depends on your lender's policies, your creditworthiness, and your home equity. Contact your lender 1-2 years before your draw period ends to discuss options.
What is HELOC payment shock?
Payment shock is the significant increase in monthly payments when you transition from interest-only payments during the draw period to principal-plus-interest payments during repayment. Payments can increase 50-100% or more, catching unprepared homeowners off guard.
Should I pay down principal during the draw period?
Yes, if you can afford it. Paying principal during the draw period reduces your balance, resulting in lower payments during the repayment period. Even small extra payments help. At minimum, don't let your balance grow.
Bottom Line
Your HELOC draw period is the easy part—flexible borrowing with low minimum payments. The repayment period is when reality hits.
Don't get caught off guard:
- Know your draw period end date (check your HELOC agreement)
- Calculate your expected repayment period payment
- Start preparing now—pay extra when you can
- Explore your options 1-2 years before the transition
A HELOC is a powerful financial tool. But like any tool, it works best when you understand how it operates—including what happens when the draw period ends.
Approaching the end of your draw period?
HonestCasa can help you explore refinance options or a new HELOC. See what you qualify for—with no pressure and no hidden fees.
[Check My Refinance Options →]
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