📌 Key Takeaway: Most HELOCs have a 10-year draw period where you can borrow and make interest-only payments, followed by a 10-20 year repayment period where you can no longer draw and must pay both principal and interest.
During the Draw Period
You can borrow up to your credit limit as needed, repay it, and borrow again — similar to a credit card. Many HELOCs only require interest-only payments during this phase, which keeps payments low but means the balance doesn't shrink unless you pay extra.
When the Repayment Period Begins
Once the draw period ends, you can no longer borrow, and your payment typically jumps significantly since it now includes principal — this jump surprises borrowers who only budgeted for the low interest-only payments.
Avoiding Payment Shock
- Ask your lender for the exact repayment-period payment estimate well before the draw period ends.
- Consider paying more than interest-only during the draw period to reduce the balance ahead of time.
- Explore refinancing into a new HELOC or home equity loan before the repayment period begins if the jump isn't manageable.
This page is for educational purposes and isn't personalized financial or tax advice. Figures, rates, and program details change frequently — confirm current terms directly with lenders, tax professionals, or the IRS before acting.