HELOC Draw Period Ending? Here’s What to Expect
If your home equity line of credit (HELOC) draw period is ending soon, it’s time to plan ahead. Many HELOC borrowers are surprised by steep monthly payments once the repayment period begins. Others worry about losing access to their credit line or whether they can qualify for a refinance before the draw period expires.
Understanding your options in advance can help you prepare for the transition and avoid unnecessary financial stress.
- HELOC draw periods usually last five to 10 years, after which the repayment period begins.
- Monthly payments often increase sharply after you exit the draw period because the principal balance repayment starts.
- You can prepare by reviewing your options — including refinance and renewal — several months before the draw period ends.
What is a HELOC draw period?
A HELOC has two phases: The draw period is for borrowing against the credit line, and the repayment period is for paying it back.
Your draw period is a set number of years, typically anywhere from five to 10 years or more. During that time, you’ll have to make minimum interest payments but, in most cases, you won’t have to pay down the principal balance just yet. This typically means you’ll have relatively low payments that vary based on how much you’ve drawn, just like with a credit card.
Overview: HELOC draw period vs. repayment period
| Draw period | Repayment period | |
|---|---|---|
| When it happens | Starts immediately after HELOC approval | Begins once the draw period ends |
| Typical length | 10 years | Up to 20 years |
| Can you make draws? | Yes, up to your credit limit | No |
| Payment amount | Lower, as they’re typically interest-only (and only on the amount drawn) | Higher, as they include principal and interest |
| Can you pay off the loan early? | Yes, though many lenders apply a penalty for paying off the loan within the first three years | Yes, though some lenders apply an early payoff penalty during this phase |
| Best for | Ongoing or fluctuating expenses (like home renovations or education costs) | Steady payoff of the funds you’ve already borrowed |
Spending money during the draw period: How it works
Let’s say you took out a HELOC to pay for a home improvement project, such as finishing your basement or installing a new roof. The draw period is the window of time during which you’re buying supplies or paying a contractor to do the work.
In many cases, your lender will give you a credit card or special checks you can use to spend the money. It will also set your credit limit, or the maximum amount you can borrow, based on how much home equity you have.
Can you pay off a HELOC during the draw period?
Yes, you can pay off a HELOC during the draw period, and most lenders let you do it without penalty. Paying down the balance during this phase lowers the interest charges since HELOC interest accrues only on the amount drawn, not the full credit limit.
Some lenders do charge an early closure fee if the account is paid off and closed within the first few years, so check the terms before paying off a large balance. Even with a fee, paying down the principal during the draw period still cuts the interest owed over the life of the loan, since draw period payments are interest-only by default and any extra amount goes straight to principal.
Remember: Paying off the balance during the draw period doesn’t close the account automatically. As with a credit card, the credit line stays open unless you tell your lender you want to close it.
It’s crucial to have a plan for repaying your HELOC once the draw period ends, as well as considering how the repayment period will impact your monthly payments. It’s not uncommon for people’s minimum payment to double once the draw period ends and full repayment begins.
Depending on your repayment strategy, you may need to take action before the draw period ends. We’ll cover these in more detail later.
At the end of the draw period, you may qualify to renew or refinance your HELOC and restart the clock on a new draw period. Otherwise, you’ll enter the repayment period.
How does HELOC repayment work?
Once therepayment period hits, you won’t be allowed to make additional withdrawals from your credit line. Your lender will require you to start paying back what you’ve borrowed, with interest. Now that the days of interest-only payments are over, expect your monthly payments to jump significantly — especially if you didn’t pay down the principal balance at all during your draw period.
Your repayment period will generally be a set number of years, typically 10 to 20. Most HELOCs have variable interest rates, so your monthly payment may change over the course of your repayment period. This is different from a standard mortgage or home equity loan, both of which you immediately start repaying in equal installments with a fixed interest rate, meaning your monthly payments don’t change.
Example payments: HELOC draw period vs. repayment period
For example, let’s say you’ve finished your basement renovation. You spent $25,000 on materials and paid for them with a fixed-rate HELOC with a 7.75% interest rate.
Here’s what your payments could look like in both the draw and repayment periods:
| Draw period | Repayment period | |
|---|---|---|
| Time period | Years one through 10 | Years 11 through 20 |
| Monthly payment | $147 on average ($97 at the lowest, $161 at the highest) | $300 |
As you can see, your monthly payment would more than double once the draw period ended. This isn’t unusual for HELOCs; in fact, there’s a name for it in the industry: “payment shock.” This is why it’s so important to have a plan in place before your HELOC draw period ends.
Some HELOCs require you to immediately pay what you owe when the draw period ends. This is called a balloon payment. It’s not the most common option, though, since any loan with a balloon payment is a nonqualified (non-QM) mortgage. Non-QM loans fall outside the federal standards for mortgages set by the Dodd-Frank Act.
Non-QM loans typically come with higher interest rates and fees because lenders take on more risk without the legal protections that QM loans provide. However, they can offer more flexibility for borrowers who can’t meet the traditional requirements but are still creditworthy.
Your HELOC repayment options before the draw period ends
1. Make the minimum payments
Best for: Borrowers who need more room in their budget in the short term.
It’s OK to make the minimum payments during the draw period as long as you’re keeping tabs on when the draw period ends and what your payments might look like once it does. It’s common for monthly payments to more than double once the repayment period hits, though, so make sure you have enough room in your budget to comfortably afford the higher amount.
2. Pay more than the minimum payment during the draw period
Best for: Borrowers who have some flexibility in their monthly budget that allows them to pay more than the minimum.
During the draw period, you usually won’t be forced to make more than the minimum interest payments on the amount you borrow. However, you’ll likely have the option to also pay down the principal balance — and doing so can help ease any whiplash you might feel when you enter the repayment period.
It can pay to double-check your loan paperwork for prepayment penalties, which some HELOCs have. The penalty is an additional fee that’s charged when you pay off the credit line early. In some cases, these fees can also apply when you make more than your scheduled payment.
3. Convert to a fixed-rate loan
Best for: Borrowers who are more comfortable with set payments that won’t change over time.
HELOCs usually have variable interest rates, but some lenders will allow you to choose a fixed-rate option or convert some or all of an existing HELOC balance to a fixed-rate loan. This has the advantage of locking in your monthly payment, so you don’t have to worry about it rising over time. Keep in mind, however, that lenders usually require you to convert to a fixed-rate option before your draw period ends.
Your HELOC repayment options after the draw period ends
1. Make the standard payments
Best for: Borrowers who can comfortably afford higher monthly payments.
Once you enter the repayment period, unless you’re facing a balloon payment, your lender will fully amortize the loan. This means the lender will create a monthly principal and interest payment plan that will fully pay off the loan over a set number of years.
HELOCs traditionally come with variable interest rates, so your payments will likely change over time. The changes will track interest rate benchmarks, so your payment will rise and fall with the broader market.
2. Renew or refinance to another HELOC
Best for: Homeowners who still need access to revolving credit.
You may be able to renew your HELOC at the end of the draw period. This can save you from having to take out a new loan if you plan to borrow more in the future. You’ll then re-enter a new draw period, restarting the clock on the time you get to withdraw from your credit line.
3. Refinance to a home equity loan
Best for: Borrowers who want predictable monthly payments.
Another option is to use a home equity loan to pay off your outstanding HELOC balance. In today’s market, home equity loan rates and HELOC rates are typically very similar to one another. Swapping into a home equity loan may make sense if you prefer a loan with a fixed rate and predictable payments.
4. Use a cash-out refinance
Best for: Homeowners who can qualify for a lower first mortgage rate with a refinance, or who need to refinance both loans.
If you want to refinance your first mortgage, you can use a cash-out refinance to pay off your HELOC at the same time. However, if you use the cash to pay off some — but not all — of the HELOC, you’ll pay extra fees or higher interest rates on that new first mortgage. The fees will depend on the combined loan-to-value (CLTV) ratio of both loans.
5. Make a balloon payment
Best for: Borrowers with enough savings to cover the balloon payment.
Some HELOCs require a balloon payment at the end of the draw period. Because it will pay off the full amount, a balloon payment could be as large as tens of thousands of dollars. Don’t count on being able to refinance out of a balloon payment.
You may also choose to do this on your own by voluntarily paying off the loan with a lump sum at any time. Just be aware that some HELOC lenders charge a prepayment penalty if you completely pay off and close the loan ahead of schedule.
Frequently asked questions
In many cases, nothing — you can keep your full HELOC credit line in reserve for emergencies or choose never to use it. If you don’t plan to use your HELOC funds right away (or at all), make sure to check that your HELOC doesn’t charge an inactivity fee or require a specific initial draw.
With a variable-rate loan, the interest rate you pay will change periodically based on overall market conditions. The interest rate you pay on a HELOC is often tied to the prime rate, which is set by the nation’s major banks and influenced by the Federal Reserve. How often this resets varies from loan to loan, so be sure to note how often your rate will change. Your lender may also offer a low introductory rate for a short time.
Your HELOC will typically also have a maximum interest rate, called a cap. Some HELOCs also have caps on how much your monthly payment can increase, and minimum interest rates you pay if rates fall.
HELOCs are secured by your home, meaning you face foreclosure if you don’t make your payments. If you think you’ll miss a payment or run into trouble making HELOC payments, contact your loan servicer immediately.
Yes, you can take out a HELOC against the equity you have in any property, including investment or secondary homes and multifamily properties. However, you’ll probably pay a higher interest rate, since lenders consider it riskier to lend money against a home that you don’t live in.
It may also be more difficult to find a lender willing to issue a HELOC secured by an investment property. However, LendingTree’s editorial team has reviewed several lenders that offer them, including TD Bank and Pentagon Federal Credit Union.
If you’re in the market for a HELOC but unsure of where to start, our list of the best HELOC lenders of 2026 can help you identify a lender that suits your needs.
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