Home equity guide
What happens when your HELOC draw period ends?
The line closes to new draws and the payment starts covering principal. For a lot of people that's a big jump. Here's how big, and what to do about it.
When a HELOC's draw period ends, usually after 10 years, you can't borrow from the line anymore and the balance starts paying down over a repayment period, often 20 years. If you've been making interest-only payments, your monthly payment goes up, sometimes by a lot.
That's the whole mechanism. The rest of this guide is how big the jump is and what your options are. If you're shopping for a new line, my Orange County HELOC page covers how I compare lenders.
The two phases of a HELOC
Most HELOCs are built in two parts.
The draw period. Typically 10 years. You can borrow, pay back and borrow again, like a credit card secured by your house. Many lines only require interest on what you've drawn during this phase.
The repayment period. Often 20 years, sometimes 10 or 15. The line closes to new draws. Every payment now includes principal, so the balance actually goes down.
A few HELOCs skip the second phase and require the full balance at the end of the draw period. That's a balloon. It's less common, but if you have one, the stakes are higher. Pull out your HELOC agreement and look for the words "repayment period" or "maturity."
How big is the payment jump? An illustration
Round numbers. Not a quote.
- HELOC balance at the end of the draw: $100,000 (illustration)
- Repayment period: 20 years (240 months)
Interest-only during the draw. On $100,000, every 1 percentage point of rate costs about $83 a month. So the interest-only payment is roughly $83 times your rate. If your rate is in the single digits, you're somewhere in the hundreds of dollars a month.
Principal and interest during repayment. Now you're also paying back $100,000 over 240 months. Principal alone averages about $417 a month ($100,000 ÷ 240).
In the first month of repayment, the principal slice is smaller than $417 and the interest slice is about what you were paying before. As the balance falls, interest shrinks and principal grows. The total payment stays level if the rate stays level.
What that means in practice: the new payment can run anywhere from about 15% to 60% higher than the interest-only payment. Oddly, the lower the rate, the bigger the jump in percentage terms, because principal becomes a bigger share of the bill. If your rate has also gone up during the draw period, stack that on top. You can plug your own rate into the HELOC payment calculator to see your exact before and after.
Why this catches people off guard
At Chase I saw this one from the bank side. Monthly statements during a draw period show a small minimum payment, and a lot of people come to think of that number as "the HELOC payment." Ten years later the first repayment bill arrives and it's a different number. The notices go out ahead of time, but they're easy to skim past.
Rates also move over a decade. A line opened when prime was low can be at a meaningfully higher rate by the time repayment starts. The combination of a higher rate and a principal payment is what hurts.
Your options when the draw period ends
You're not stuck with whatever the repayment schedule says. Here are the realistic moves.
1. Pay it down or pay it off
If you've got cash, a bonus, or a sale coming, paying down the balance before repayment starts shrinks the new payment. Many HELOCs let you pay principal any time without a penalty. Check yours for an early-closure fee if you're closing the line in the first few years, though that rarely applies at year 10.
2. Refinance into a new HELOC
A new HELOC pays off the old one and restarts the clock with a fresh draw period. Your first mortgage stays untouched. This works well if you still want flexible access and your equity and income support it. You'll requalify, so see HELOC requirements in California before you apply.
3. Lock a fixed rate on the balance
Some HELOCs let you convert part or all of the balance to a fixed rate for a set term. Your payment becomes predictable, and variable-rate risk goes away on that portion. Not every lender offers it, and there can be a fee per lock. Call your current lender and ask what options your line has.
4. Switch to a home equity loan
A home equity loan is a fixed-rate, fixed-payment second mortgage. You pay off the HELOC with it and get one steady payment. You lose the ability to redraw, but you gain certainty.
5. Fold it into a cash-out refinance
If your first mortgage rate is near today's market, or the combined balance is manageable, a cash-out refinance can pay off both loans and leave you with one fixed payment. If your first mortgage has a low rate, this one usually costs more than it saves, because you're repricing the whole first mortgage. I walk through that math in HELOC vs. cash-out refinance.
Timing: start 6 to 12 months early
Don't wait for the first repayment bill. Start looking 6 to 12 months before your draw period ends.
- Values and income can change. Qualify while things look good, not after.
- Refinancing takes time. Appraisals, insurance, title and underwriting all add weeks.
- Your options shrink if you're late. Once you're in repayment, you can still refinance, but you've already paid the higher payments in the meantime.
Here's a simple checklist:
- Find your draw-period end date on your HELOC agreement or statement.
- Write down the current balance and rate.
- Ask your lender what the repayment payment will be and whether fixed-rate locks are available.
- Get a comparison on at least two alternatives from the list above.
- Pick the one with the lowest total cost for how long you'll actually carry the balance.
Where I come in
I don't care which option you pick. I care that you see them side by side before your payment changes. I compare lenders on a new HELOC, a home equity loan and a cash-out refi at the same time, and each quote comes with its APR and costs. If your current lender's lock option is the cheapest move, I'll tell you to take it.
Questions people ask
What happens at the end of 10 years of a HELOC?
On a typical HELOC, the first 10 years are the draw period. When it ends, you can't draw any more, and the balance moves into a repayment period, often 20 years, where each payment covers principal and interest. If you were paying interest only, your payment goes up. Some HELOCs instead require the full balance at the end, so check your agreement.
How much will my HELOC payment go up after the draw period?
It depends on your balance, your rate and the length of the repayment period. On a $100,000 balance repaid over 20 years, principal alone averages about $417 a month ($100,000 divided by 240 months), on top of the interest you were already paying. If the rate has risen during the draw period, the jump is bigger.
Can I refinance a HELOC before the draw period ends?
Yes. Common moves are a new HELOC with a fresh draw period, a fixed-rate home equity loan, or folding the balance into a cash-out refinance of your first mortgage. Starting 6 to 12 months early gives you time to compare lenders before the payment changes.
What is a HELOC repayment period?
It's the second phase of a HELOC, after the draw period. You can no longer borrow from the line, and your payments pay the balance down to zero over a set term, commonly 10 to 20 years. Rates on most HELOCs stay variable during repayment unless you've locked a portion.
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