Understanding HELOC Payment Math: Draw Period, Repayment Period, Interest-Only vs. P&I

The single most dangerous misconception about HELOCs is that the monthly payment you're making during the first several years is what you'll always pay. It isn't. Most HELOCs have a structural payment increase built into them that catches borrowers off guard — sometimes doubling or tripling their monthly obligation overnight.

I've seen borrowers who comfortably carried $150,000 HELOC balances at $1,031/month suddenly face $1,896/month when their draw period ended. They had no idea it was coming.

This guide breaks down exactly how HELOC payments are calculated in both phases, shows you the real numbers, and helps you plan for what's ahead.

The Two-Phase Structure Every Borrower Must Understand

A standard HELOC has two distinct phases:

Phase 1: The Draw Period (Typically 10 Years)

During the draw period:

You can borrow up to your credit limit at any time
You can repay and re-borrow freely (it's revolving)
Most lenders require only interest payments — no principal reduction required
Some lenders require a small principal component (1-2% of balance)
Your rate is variable, adjusting monthly or quarterly based on Prime

Phase 2: The Repayment Period (Typically 20 Years)

When the draw period ends:

You can no longer borrow — the line is frozen
Your outstanding balance converts to an amortizing loan
Payments now include both [principal and interest](/blog/amortization-schedule-guide)
The balance must reach $0 by the end of the repayment period
The rate typically remains variable

The total HELOC term is usually 30 years: 10-year draw + 20-year repayment. Some lenders offer 5+15, 10+15, or 10+10 structures. The specific terms are in your HELOC agreement — read it before signing.

Interest-Only Payment Math (Draw Period)

During the draw period, your minimum payment is typically interest only. The formula is straightforward:

Monthly Interest-Only Payment = Outstanding Balance × (Annual Rate / 12)

Example Calculations at Various Balances and Rates

Balance	Rate 7.50%	Rate 8.50%	Rate 9.50%	Rate 10.50%
$25,000	$156	$177	$198	$219
$50,000	$313	$354	$396	$438
$75,000	$469	$531	$594	$656
$100,000	$625	$708	$792	$875
$150,000	$938	$1,063	$1,188	$1,313
$200,000	$1,250	$1,417	$1,583	$1,750
$250,000	$1,563	$1,771	$1,979	$2,188

Key insight: [Interest-only payments](/blog/heloc-draw-period-vs-repayment) feel manageable because you're not paying any principal. That $100,000 balance at 8.50% costs just $708/month. But after 10 years of interest-only payments, you still owe $100,000. You've paid $84,960 in interest and reduced your principal by exactly $0.

How Variable Rates Affect Monthly Payments

[HELOC rates](/blog/best-heloc-lenders-2026) adjust with Prime. Each 0.25% rate change affects your payment:

Payment Change per 0.25% Rate Move = Balance × (0.0025 / 12)

For a $100,000 balance:

Each 0.25% increase = +$20.83/month
A 1.00% increase = +$83.33/month
A 2.00% increase (eight Fed hikes) = +$166.67/month

This is why rate risk matters. Your $708/month payment at 8.50% becomes $875/month if rates increase by 2%. There's no cap on how much your payment can change during a single year on most HELOCs — unlike adjustable-rate mortgages, which typically have annual and periodic caps.

However, your HELOC does have a lifetime rate cap (usually 18-21%). This is the absolute ceiling your rate can reach.

The Repayment Period: Where Payment Shock Lives

When your draw period ends, the math changes dramatically. Your outstanding balance must now amortize to $0 over the repayment period (usually 20 years). The formula is the standard amortization calculation:

Monthly P&I Payment = Balance × [r(1+r)^n] / [(1+r)^n - 1]

Where:
r = Monthly interest rate (Annual rate / 12)
n = Number of remaining monthly payments

The Payment Shock: Real Numbers

Let's look at what happens when a $100,000 balance transitions from interest-only to fully amortizing at various rates:

Rate	Interest-Only Payment (Draw Period)	P&I Payment (20-Year Repayment)	Payment Increase	% Increase
7.50%	$625	$806	+$181	+29%
8.50%	$708	$868	+$160	+23%
9.50%	$792	$932	+$140	+18%
10.50%	$875	$999	+$124	+14%

At 8.50%, your payment jumps from $708 to $868 — a $160/month increase. That's manageable for many borrowers.

But here's the worse scenario. Many borrowers draw aggressively during the draw period, reaching larger balances:

$200,000 balance at 8.50%:

Interest-only payment: $1,417/month
P&I payment (20-year repayment): $1,736/month
Payment increase: +$319/month

$200,000 balance at 10.50% (if rates rise):

Interest-only payment: $1,750/month
P&I payment (20-year repayment): $1,997/month
Total payment nearly $2,000/month

The Compressed Repayment Problem

Some HELOCs have shorter repayment periods. A 10+10 structure (10-year draw, 10-year repayment) creates significantly higher payments because the principal must amortize over just 10 years:

$100,000 balance, 10-year repayment:

Rate	P&I Payment (10 yr)	vs. Interest-Only	% Increase
7.50%	$1,187	+$562	+90%
8.50%	$1,240	+$532	+75%
9.50%	$1,294	+$502	+63%

A 10-year repayment period nearly doubles your payment compared to interest-only. This is the scenario that causes genuine financial hardship. Check your HELOC agreement for the repayment period length before signing.

Making Voluntary Principal Payments During the Draw Period

The smartest HELOC strategy is making principal payments during the draw period, even though they're not required. Here's why the math is compelling:

Scenario: $100,000 HELOC at 8.50%, 10-Year Draw + 20-Year Repayment

Strategy A — Minimum payments (interest only) for 10 years:

Monthly payment years 1-10: $708
Balance at end of draw period: $100,000
Monthly payment years 11-30: $868
Total interest paid over 30 years: $293,176

Strategy B — Pay $1,000/month during draw period:

Monthly payment years 1-10: $1,000 ($708 interest + $292 principal)
Balance at end of draw period: ~$63,800
Monthly payment years 11-30: ~$554
Total interest paid over 30 years: $213,504
Interest savings: $79,672

Strategy C — Pay $1,500/month during draw period:

Monthly payment years 1-10: $1,500
Balance at end of draw period: ~$23,100
Monthly payment years 11-30: ~$201
Total interest paid over 30 years: $143,520
Interest savings: $149,656

By paying just $292/month extra during the draw period, you save nearly $80,000 in interest and reduce your repayment-period payment by $314/month. That's an extraordinary return on the extra payment.

The "Match Your Future Payment" Strategy

Here's a practical approach: calculate what your P&I payment would be if your full balance transitioned today, then start making that payment now.

If you owe $100,000 at 8.50% with a 20-year repayment ahead, your future P&I would be $868. Start paying $868/month now instead of $708. The extra $160/month goes to principal, and by the time your draw period ends, your balance will be substantially lower — and the transition to "required" P&I payments will be seamless because you're already making them.

How Draws and Repayments Interact During the Draw Period

Unlike a fixed loan, your HELOC balance fluctuates. Understanding how draws and payments interact is essential for managing costs.

Daily Interest Accrual

Most HELOCs calculate interest daily:

Daily Interest = Outstanding Balance × (Annual Rate / 365)

At $100,000 and 8.50%:

Daily interest: $23.29
If you draw $20,000 on the 15th of the month, you pay 15 days of interest on $100,000 and 15 days on $120,000

This means timing matters. If you need to make a large draw, doing it later in the month reduces that month's interest slightly. If you're making a large repayment, doing it earlier in the month maximizes your interest savings.

The Float Strategy

Some borrowers use their HELOC as a cash management tool:

Deposit paycheck into checking ($5,000)
Immediately pay $5,000 toward HELOC balance
Use HELOC for expenses throughout the month via HELOC-linked checking or card
Net effect: balance is lower for ~15 days per month

On a $100,000 balance, keeping $5,000 extra against the balance for 15 days/month saves approximately:

$5,000 × 0.085 × (15/365) × 12 = $209/year

It's not transformative, but it's free money for borrowers who maintain consistent cash flow. Some lenders (like CMG Financial with their All-In-One loan) build their entire HELOC product around this concept.

Planning for Rate Changes

Since HELOC rates are variable, you need to stress-test your budget against rate increases.

Build a Rate Sensitivity Table

For your specific balance, calculate payments at multiple rate levels:

Example: $120,000 balance

Prime Rate	Your Margin	Your Rate	Interest-Only	P&I (20yr)
7.50%	+0.25%	7.75%	$775	$984
8.00%	+0.25%	8.25%	$825	$1,026
8.50%	+0.25%	8.75%	$875	$1,068
9.00%	+0.25%	9.25%	$925	$1,111
9.50%	+0.25%	9.75%	$975	$1,155
10.00%	+0.25%	10.25%	$1,025	$1,199

Your budget should accommodate payments at least 2% above today's rate. If you can't afford the payment at today's rate + 2%, your balance is too high.

The Fixed-Rate Conversion Option

Many lenders offer a fixed-rate lock option (sometimes called a "rate lock" or "fixed-rate advance") that lets you convert all or part of your variable HELOC balance to a fixed rate. Key terms:

You choose the amount to convert and the fixed-rate term (usually 3, 5, 7, 10, or 15 years)
The fixed rate is typically 0.50-1.50% higher than your current variable rate
The converted portion amortizes on a fixed schedule
Your remaining variable-rate capacity stays available for draws

When to consider it:

When you have a large balance you can't repay quickly
When rates have dropped and you want to lock in
When you're approaching the repayment period and want payment certainty

When to skip it:

When you plan to repay the balance within 12-18 months
When the fixed rate premium is more than 1.00% above your variable rate
When you need the flexibility to repay and re-borrow

The Refinance Decision: When to Replace Your HELOC

As your HELOC matures, you'll face a decision: ride it into the repayment period or refinance into a new HELOC (resetting the draw period) or a fixed-rate [home equity](/blog/equity-vs-appreciation) loan.

Refinance Into a New HELOC When:

Your draw period is ending within 2 years
You still need access to the revolving line
Your credit and equity position are strong enough to qualify for good terms
You want to reset the draw period clock

Convert to a Fixed-Rate Home Equity Loan When:

You have a specific balance you want to pay down on a predictable schedule
You're concerned about rising rates
You no longer need revolving access
Current fixed rates are attractive relative to your variable rate

Ride Into the Repayment Period When:

Your balance is low enough that the P&I payment is comfortable
You want to eliminate the debt within the repayment term
Refinancing costs would outweigh the benefit
You don't need ongoing access to the credit line

Monthly Payment Quick Reference

Use this table to estimate your payments at common balance and rate combinations:

Interest-Only Payments (Draw Period)

Balance	7.5%	8.0%	8.5%	9.0%	9.5%	10.0%
$50K	$313	$333	$354	$375	$396	$417
$100K	$625	$667	$708	$750	$792	$833
$150K	$938	$1,000	$1,063	$1,125	$1,188	$1,250
$200K	$1,250	$1,333	$1,417	$1,500	$1,583	$1,667

P&I Payments (20-Year Repayment Period)

Balance	7.5%	8.0%	8.5%	9.0%	9.5%	10.0%
$50K	$403	$418	$434	$450	$466	$483
$100K	$806	$836	$868	$900	$932	$965
$150K	$1,209	$1,254	$1,302	$1,349	$1,399	$1,448
$200K	$1,611	$1,673	$1,736	$1,799	$1,865	$1,931

The Bottom Line: Know Your Numbers

The borrowers who get into trouble with HELOCs aren't reckless — they simply didn't understand the payment structure. They budgeted for interest-only payments indefinitely and were blindsided when the repayment period arrived.

Here's your action plan:

Find your HELOC agreement and identify your draw period end date and repayment period length
Calculate your current interest-only payment and your future P&I payment using the formulas above
Start making voluntary principal payments now — even an extra $100-$200/month makes a significant difference over time
Build a rate sensitivity table for your specific balance to understand your exposure to rate increases
Set a calendar reminder 2 years before your draw period ends to evaluate refinancing options

The math isn't complicated, but the consequences of ignoring it are. Know exactly what you'll owe, when you'll owe it, and have a plan to manage the transition. Your future self will thank you.

[[Home [Equity Explained](/blog/home-equity-explained)](/blog/what-is-home-equity): What It Is and How to Build It](/blog/home-equity-explained)
Blended Family Home Planning: Merging Households and Managing Home Equity
[How to [[Build Home Equity](/blog/equity-building-strategies) Faster](/blog/build-home-equity-faster): 8 Proven Strategies](/blog/build-home-equity-faster)

Heloc Repayment Calculator Guide

Key Takeaways