HELOC Draw Period vs. Repayment Period Explained (Avoid Payment Shock)

U.S. homeowners: your home equity line of credit has two phases. See how the draw period becomes the repayment period, and why payments rise. Get plain examples, simple math, and steps to plan with your lender. Use our calculator to project your monthly payment and avoid payment shock. We’re here to help you plan, not panic.

What a HELOC is, and Why Timing Matters

A HELOC is a revolving line of credit secured by your home. You can borrow, repay, and borrow again during the first phase, then you must fully repay later. The Consumer Financial Protection Bureau explains that a HELOC uses your house as collateral and often has a variable interest rate. Read their official booklet for fundamentals, fees, and rights.

Phase 1: The Draw Period (Interest-Only)

During the draw period, you can access your credit line as needed. Many lenders let you make interest-only payments on your outstanding balance. Chase notes draw periods often run 3 to 10 years, with borrowing, repayment, and re-borrowing allowed. Expect higher payments later when principal begins.

Tip: Pay principal now if you can. It cuts your later payment and total interest.

Phase 2: The Repayment Period (Principal + Interest)

When draw ends, you enter the repayment period. You can no longer borrow. Your bill now includes principal and interest. That makes the monthly payment rise. Chase and Bankrate both warn of higher payments when amortization starts, and variable rates can move your bill up or down. Many plans give 10 to 20 years to repay. Credit unions and banks publish similar ranges.

Example math (for context):

  • Balance $100,000 at 7% during draw → about $583 interest-only.
  • Same balance amortized over 10 years at 7% → about $1,161 per month.
    That is about double. Numbers are illustrative only.

Note: Some lenders allow a fixed interest rate conversion for stability. Ask about a lock or segment option. CFPB rules require clear disclosure of such features.

Why “Payment Shock” Happens

In draw, many pay interest only. The principal often stays the same. Then amortization begins. The same balance must be repaid in fewer years, so the monthly payments jump. Bankrate explains that this shift can raise payment amounts a lot, especially with variable interest rates. CBS News quotes mortgage experts on this jump and urges borrowers to mark the exact reset date.

What Changes at Reset: A Quick Checklist

  • Borrowing stops. No more access to the credit line.
  • Payment type changes. You now pay principal plus interest.
  • Rate can move. Most HELOCs use a variable rate tied to an index plus margin.
  • Timeline stretches. Typical repayment periods run 10 to 20 years.
  • Fees may apply. Check for annual fees, inactivity charges, or early closure costs in your agreement or lender FAQs

Prepare Early: Simple Moves That Lower Stress

1) Run the numbers. Use our free calculator to model your post-draw monthly payment amount. Try different rates, terms, and extra principal.


2) Pay principal during draw. Even $50 to $200 per month helps. It lowers the future payment and total interest.

3) Practice the higher payment. Save the difference now. You will adjust your budget and build a cushion. Guidance from CBS News urges early planning to avoid shocks.
4) Ask about a fixed-rate option. Some lenders let you convert part or all to a fixed interest rate. That stabilizes your bill.

5) Watch statements and notices. Lenders usually alert you before reset. Contact them if anything looks off.

6) Mind your credit habits. Keep your credit cards paid on time. Protect your credit score before any refinance check by a lender.

Smart Uses During Draw

Reserve the funds for projects with real value. Homeimprovements can raise marketvalue and are a common fit for a homeequityline. Avoid non-essential expenses that add debt without return. Investopedia warns against using HELOCs for vacations, cars, or risky bets.

Options If the New Payment is too High

You have choices. Compare costs, rates, fees, and timing.

Talk To Your Lender First

Ask about extending the repayment period, re-amortization, or hardship help. Many lenders prefer a plan over missed payment. Lenders often notify you before reset and can discuss terms.

New HELOC to Replace the Old One


Some borrowers open a new HELOC to pay off the old line of credit. That restarts a draw phase. It can help short term but may raise lifetime interest if rates climb. Review closing costs and annual fees first. Use caution and a clear payoff plan. General lender education pages stress understanding the full term and rate features before deciding.

Convert To a Fixed Home Equity Loan

A home equity loan gives a lump sum, fixed interest rate, and steady payments. Citizens explains that many lenders can convert or set a fixed rate for the remainder of repayment. That can tame volatility.

Cash-Out Refinance of Your Primary Mortgage

You replace your first mortgage and use cash-out funds to clear the HELOC. Compare the new APR, closing costs, and term length. CBS News and Bankrate rate trackers help you judge current interest rates.

Sell Or Downsize as a Last Resort


If the budget cannot handle the reset, consider selling while you still have equity. Protect your credit and avoid default.

Warning: A HELOC is secured by your home. Missed payments can lead to foreclosure. CFPB materials stress the risk and the need to budget for variable-rate plans.

Rates, Caps, And Your Budget

Most HELOCs track an index plus a margin. If the index rises, your interest rate rises. The CFPB explains how variable-rate loans use an index and margin, which can raise payments when the index moves.

Older CFPB booklets also explain lifetime caps that limit how far rates can climb over the loan. Check your agreement for periodic and lifetime caps. Use our calculator to test a higher rate case. Plan for a worst-case payment now.

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Fees To Watch

Scan your agreement and lender FAQ for annual fees, inactivity charges, appraisal costs, or early closure fees. These add to the total cost of borrowing. Chase lists common fees and how payments apply during both phases.

Quick Examples You Can Copy


Use these as templates with your own numbers.

Scenario A

  • Balance: $50,000
  • Interest rate: 6%
  • Draw, interest-only: about $250 per month
  • Repay over 15 years at 6%: about $422 per month

Scenario B

  • Balance: $100,000
  • Interest rate: 7%
  • Draw, interest-only: about $583 per month
  • Repay over 10 years at 7%: about $1,161 per month

These are estimates for teaching. Your lender’s rates, fees, and repayment term control the final payment.

Responsible Borrowing, Plain and Simple

  • Borrow only what you need.
  • Keep the credit score strong.
  • Avoid high-cost debt swaps without a payoff plan.
  • Use home improvements or other value-building goals to guide spending.
  • Save during the draw.
  • Read every notice from your lender.

See your post-draw payment in one minute. Use the calculator, save the screencopy, and set your action plan today.

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