The draw period
During the draw period — commonly several years — you can borrow against the available line as needed. Many HELOCs allow interest-only payments during this phase, which can keep monthly costs lower while you have access to funds.
Because rates are often variable, the interest you owe can rise or fall as market rates change, even if your balance stays the same.
The repayment period
Once the draw period ends, the HELOC enters a repayment period. New draws are no longer permitted, and you begin repaying both principal and interest over the remaining term.
If you carried a sizable balance with interest-only payments during the draw period, the transition to fully amortizing payments can meaningfully increase your monthly cost.
Planning ahead
Reviewing your draw-period balance well before the repayment phase begins can help you plan. Some borrowers prepay during the draw period to reduce the eventual repayment amount.
- HELOCs typically have a draw period followed by a repayment period.
- Interest-only payments during the draw period are common but mask the eventual repayment cost.
- Variable rates can change your interest charge even when your balance does not.
- Plan for the repayment period before it begins.
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