HELOC Repayment Period: What to Expect and How to Prepare

What happens when your HELOC’s ‘interest-only’ honeymoon ends?

First off, don’t panic. If you understand how HELOCs work, this shift to the repayment period is expected—and manageable with the right plan.

Here’s how to prepare for the changeover to the HELOC repayment period and avoid financial strain.

Managing the shift to the HELOC repayment period can be easy

HELOCs are an incredibly popular borrowing option due to great features like:

• Flexibility of withdrawal options
• Lack of restrictions on how the money is used
• Revolving credit functionality

However, like any loan, there comes a time when you must begin paying back the principal borrowed from your home equity line of credit.

Knowledge is key

Understanding how HELOC repayment works, how much you’ll owe, and whether interest rates could affect your payments can help you plan and avoid financial stress.

To help you out, we’ll break down everything you need to know about the HELOC repayment period, including:

• How payments might change
• Whether you can extend your term
• What to do if payments become challenging

Let’s take a look.

What does a “HELOC repayment period” mean?

HELOCs work much differently than standard loans.

In the first phase, they function like revolving lines of credit, followed by a secondary, more structured repayment phase.

How the draw period works

The draw period typically lasts 5 to 10 years, during which you can borrow as needed, up to your credit limit.

Monthly payments are usually interest-only, keeping costs low.

Key features of the draw period

• Flexible borrowing: You can withdraw funds as needed, much like a credit card.
• Revolving credit: As you repay, those funds become available again.
• Interest-only payments: Your loan balance stays unchanged unless you make extra payments.
• Variable interest rates: Your rate is usually tied to an index, such as the Prime Rate, and can change over time.

How the HELOC repayment period works

Once the draw period ends, the loan shifts to the repayment phase.

Borrowing stops, and payments increase as you pay both principal and interest.

A loan repayment period may last anywhere from 10 to 20 years. Since you’re now repaying the entire balance, monthly payments may be significantly higher than during the draw phase.

Key features of the repayment period

• Fixed or variable interest: Some lenders offer a fixed-rate conversion for more predictable payments.
• Amortized payments: Payments are structured to pay off the full balance by the end of the term.
• No further borrowing: You can no longer access additional funds from your HELOC.

How payments change during the repayment period

Paying both principal and interest means there’s likely to be an increase in monthly payments.

Here’s an example:

Let’s assume you take out a $42,139 HELOC—the average amount most homeowners borrow—at a 5% interest rate.

During the draw period, when only interest payments are required, your monthly cost would be around $175.

However, once the repayment phase begins and principal payments kick in, that amount could rise to roughly $282 monthly.

If your HELOC has a variable rate, payments can increase even further if interest rates rise.

What happens if I can’t make a HELOC payment?

Falling behind on HELOC payments can come with serious financial repercussions:

• Late penalties: Many lenders charge additional fees when payments aren’t made on time.
• Credit score decline: Missed payments can negatively affect your credit, making future loans more difficult to secure.
• Home at risk: Since a HELOC is tied to your property, continued non-payment could eventually lead to foreclosure.

If you’re struggling with payments, contact your lender early.

Options may include loan modifications, refinancing, or extending the repayment period.

Can I extend the repayment period?

Most lenders won’t automatically extend a HELOC repayment period, but you may have alternatives:

• Refinancing: You may be able to refinance into a new HELOC or home equity loan with extended terms
• Loan modification: Some lenders will adjust terms to lower payments.
• HELOC renewal: If your lender allows it, you may be able to start a new draw period.

Are there penalties for paying off a HELOC early?

Most HELOCs don’t have prepayment penalties, but some lenders charge fees if you close your HELOC too soon after opening it.

Potential early repayment costs:

• Early closure fees: Some lenders charge fees if you close the HELOC within the first few years.
• Minimum draw requirements: Some HELOCs require you to borrow a minimum amount, or you may face fees.
• Prepayment penalties (rare): While uncommon, some lenders may impose fees for early payoff.

Always review your loan terms before making an early repayment to avoid unexpected costs.

How a variable interest rate affects HELOC payments

Most HELOCs have variable rates, meaning payments can fluctuate.

Factors that influence rates

• Federal Reserve rate changes: HELOC rates typically follow when the Fed raises interest rates.
• Market conditions: Economic shifts can impact benchmark rates like the Prime Rate.
• Lender policies: Each lender sets a margin over the index rate, affecting adjustments.

How rate changes impact payments

• If your balance is $50,000 at 5%, your payment could be around $330 per month.
• If rates rise to 7%, your payment could increase to $387 per month.

To manage risk, some borrowers opt to convert their HELOC to a fixed rate if their lender offers that option.

Unlock stability for your HELOC repayment—Partner with HomeEQ

The HELOC repayment period doesn’t have to derail your financial goals.

With HomeEQ, you can refinance, lock in predictable rates, or explore ways to manage your payments while keeping your home equity working for you.

Why choose HomeEQ?

• Tailored Solutions: Convert variable rates to fixed, refinance your balance, or restructure payments to fit your budget.
• Digital Simplicity: Streamlined online process with instant rate quotes and expert guidance
• No Foreclosure Fears: Proactive support to keep your home secure and your finances on track.

Don’t wait for payments to spike—get your custom HELOC plan now.

HomeEQ turns HELOC repayment hurdles into opportunities for financial confidence.

Start your free consultation today and take control of your equity strategy.