What’s the HELOC draw period? Definition and payment tips

A home equity line of credit (HELOC) gives you flexible access to your home’s equity, and people often use it to fund big projects or expenses, like remodeling, debt consolidation, or education. This convenient option is different from a traditional loan due to its two distinct payment stages: the draw period and the repayment period.

The HELOC draw period is the time when you can borrow money against your home, much like a credit card. Then repayment starts, which adds principal fees and can cause an unpleasant surprise as costs rise.

Discover more about how these HELOC phases work and why planning payments strategically prepares your budget long term. 

What’s a draw period on a HELOC, and how does it work?

During the draw period on a HELOC, you can take out funds, repay what you’ve used, and borrow again up to your approved limit. There’s no average amount you can borrow, but many lenders limit the combined total of your mortgage and new loan to 80–90% of your house’s appraised value.

Typically, after you secure a HELOC, you withdraw funds through special checks or a dedicated debit card. But some borrowers prefer to use online or in-person transfers to move cash into their checking accounts. Then, much like a credit card, you pay back what you borrowed.

HELOC payments during the draw period are usually interest only, meaning you’re not required to pay down the principal balance yet. This makes monthly installments more manageable but leaves your balance unchanged until the draw period ends (typically in 10 years). While this results in a larger payment in the future, it’s useful for large, one-time expenses. For example, you can handle lower monthly installments as you fund a quick home renovation, then pay off the balance later once the project ends and you have more income handy. 

During the draw period, responsible borrowing and repayment choices can affect your payments down the road. Even though you don’t have to settle the balance yet, paying more than the minimum can reduce long-term financial stress once this phase ends. 

Estimate your monthly installments with Better’s HELOC calculator. Adjust factors like cash amount and loan term length, and see how interest rates affect your payments.

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Can you pay off a HELOC during the draw period?

Yes, you can pay down the principal during the draw period of a HELOC, even though it’s not required. While most people won’t pay the full amount, small installments lower your outstanding balance and reduce the interest you’ll owe over time. It also helps ease the transition into the repayment phase.

Paying off a HELOC early is a smart move if your budget allows, but be aware you could face prepayment penalties, like termination fees and inactivity charges. Consider lenders who offer flexible repayment plans and no prepayment restrictions, like Better, so you can pay off your HELOC in your own way.

Tips to get the most from the draw period on a HELOC

Here are a few ways to use the HELOC draw period strategically:

— Make extra principal payments when possible: Even small additional payments toward your balance can reduce your total interest and shorten repayment time later.

— Monitor your balance: Keeping an eye on your withdrawals helps you avoid surprises and stay within your financial comfort zone.

— Know your interest rate options: HELOCs often come with variable interest, but you can explore hybrid or fixed-rate choices for more predictability.

— Use funds for projects that increase your value: Home improvements or renovations are an investment in the value of your home and help you make better use of your equity than nonessential expenses. 

What not to do during the draw period on a HELOC

Here are a few pitfalls to consider during the draw period:

— Avoid withdrawing more than needed: It may be tempting to use the full credit line, but only borrowing what you can comfortably repay keeps your installments manageable.

— Don’t rely on minimum payments: Paying only interest may be convenient now, but it can lead to sticker shock when the next phase begins.

— Be mindful of nonessential spending: Leisure purchases like vacations and cars may not justify the long-term cost of borrowing against your home.

What happens when the HELOC draw period ends?

When the draw period ends, your HELOC moves into what’s called the repayment period. 

What’s the HELOC repayment period?

This transition marks the point where you can no longer withdraw funds, and your payment structure changes. Instead of covering only interest, you begin paying both principal and interest, which usually increases monthly payments since the balance now needs to be paid off within the remaining term of the loan.

Preparing for this change by paying into principal early and minimizing credit use can make the transition smoother. Many homeowners also refinance their HELOC by swapping to a fixed-rate home equity loan or consolidating the balance into their primary mortgage. This stabilizes interest rates and reduces total monthly payments.

The repayment period typically lasts anywhere from 10–20 years, depending on your agreement. These installments are amortized, meaning they’re structured to gradually pay down the remaining balance and the accumulated interest within the loan term. To learn more about amortization, check out our quick guide.

Tips to manage monthly payments after the draw period

Here are a few strategies to lower costs during the repayment period:

— Refinance your HELOC: Converting your balance to a new loan or line of credit can offer better terms or rates.

— Lock a fixed rate: Locking in a fixed rate during the draw period can prevent rising interest rates and make payments more predictable.

— Apply for an additional HELOC or loan: Securing a new loan or credit line to access additional cash might make sense for some borrowers, though lenders typically consider it risky, making approvals more difficult.

Plan your finances confidently with Better

The HELOC draw period gives you access to your home equity when you need it. It’s a time to borrow responsibly and make smart choices to prepare for the repayment period ahead, and Better helps you manage it your way.

Better offers a fast, fully digital HELOC with transparent terms and no prepayment penalties. Apply in as little as three minutes and secure a credit line you can use and repay flexibly and confidently.

Tap into your equity and maintain financial control with Better.

...in as little as 3 minutes – no credit impact

FAQ

How often can my HELOC interest rate adjust?

Variable-rate HELOCs can adjust frequently, often monthly or quarterly. This change is based on the index rate your lender uses. While interest rates may adjust daily, your payments update on a schedule determined by your loan terms.

What are the consequences of not paying off a HELOC?

If you fall behind on payments, your lender may charge late fees or, in severe cases, take action against your home since it serves as collateral. Not paying off a HELOC may also damage your credit score or result in legal action from the lender.

What’s the most effective way to pay off a HELOC?

Making extra payments toward principal helps you proactively reduce your balance and avoid financial strain during repayment. Many homeowners keep these additional installments more consistent by creating a firm budget and applying any extra cash to the balance, including money from side hustles or tax refunds.

How long is the draw period on a HELOC?

The draw period on a HELOC is 10 years on average, though they can range from three to 15. It depends on your chosen lender, so browse your options and ask around to find an institution that offers your preferred length.