A HELOC has two distinct phases: the draw period and the repayment period. Understanding both is essential for managing your HELOC effectively and planning for your future payment obligations.

Draw Period — Typically 10 Years

During the draw period, you have full access to your credit line. You can borrow, repay, and borrow again — as many times as you like, up to your credit limit. Your monthly payment during this period is typically interest-only on the outstanding balance. This makes the minimum payment relatively low, especially if you have not drawn much of the line.

At any time during the draw period, you can also make principal payments to reduce your balance and future interest costs.

Repayment Period — Typically 20 Years

When the draw period ends, the HELOC closes to new draws and enters the repayment period. Your outstanding balance is now amortized over the remaining 20 years, and you make fixed principal and interest payments until the balance is paid off.

The payment during the repayment period will be higher than the interest-only payment during the draw period — sometimes significantly higher if you have a large balance. This is the “payment shock” risk that HELOC borrowers should plan for.

Planning Ahead

If you anticipate carrying a significant HELOC balance into the repayment period, calculate what your P&I payment will be and ensure your budget can handle it. Making principal payments during the draw period reduces the repayment period payment and total interest cost.