• A HELOC (home equity line of credit) is separated into a draw period (often three to 10 years) and a repayment period (often five to 30 years).
  • During the draw period, funds may be borrowed against the available credit line, typically while making low interest-only payments. During the repayment period, the line is closed to additional borrowing, and the principal balance is repaid with interest.
  • Strategic action during the draw period, such as making non-required payments against the principal balance, may reduct interest expenses and help soften the transition into the repayment period.

HELOCs are a popular mortgage product for homeowners looking to leverage their home equity for home improvement projects, debt consolidation, and other major purchases or large expenses.

But there is some confusion about how HELOCs work, particularly with regard to the draw period.

This article will explain what HELOC draw periods are, how they work, and how you can manage your draw period effectively to save money and make for a smoother repayment of borrowed funds. But first, here is a quick review of what HELOCs are.   

What Is a HELOC?

A HELOC is a revolving line of credit that allows homeowners to borrow against their equity as needed (up to the predetermined credit limit). Like primary mortgages, HELOCs are secured, using the home as collateral for the debt.[1] 

Compared to home equity loans, which disburse funds in a lump sum, HELOCs are more flexible because you can borrow only what you need, as you need it. For example, imagine you open a $50,000 HELOC to finance a home renovation. You are not required to borrow the full amount, and you are only charged interest on the amount you actually borrow.[1]  You may borrow incrementally as contractor invoices become due and/or materials purchases need to be made. If the project costs only $35,000, you only pay interest on that $35,000. The other $15,000 remains available throughout the draw period in case you need additional funds for another project or expense.  

What Is the Draw Period on a HELOC?

A HELOC draw period is the time frame during which you may charge expenses against your open credit line.[1] The draw period for a HELOC from PNC Bank is 10 years, though some lenders might offer different draw periods as low as three to five years.[2] 

During the draw period, many HELOCs allow for interest-only payments.[3] With interest-only payments, you are required to pay the interest on the amount borrowed, but are not yet expected to repay the principal balance. 

While interest-only payments may keep your HELOC payments low during the draw period, it is generally advisable to begin paying down the principal balance during this period if possible to reduce overall interest expenses. Getting in the habit of repaying the principal early may also make payments more manageable during the repayment period, when payments include both principal and interest. 

If you are uneasy about an interest only minimum payment, some lenders offer a Principal and Interest payment HELOC, which will require part of the payment to be applied toward the interest due, along with the other part of the payment going toward the principal balance each month. Keep in mind that the rate can still fluctuate, so the payment may not be the same every month.

HELOC Draw Period vs. Repayment Period

Once the draw period closes, you may no longer borrow against the credit line. At this point, you enter the repayment period, during which the principal and interest must be repaid in full. The repayment period for a HELOC from PNC Bank can range from 20 to 30 years, depending on where the property is located, though some lenders may offer different repayment periods as low as five to 10 years.[2] 

Your required payment amount may increase substantially as you transition from the draw period to the repayment period, particularly if you made interest-only payments during the draw period.[3] 

How To Manage Your HELOC During the Draw Period

Managing your HELOC effectively during the draw period may help you save on interest, protect your credit score, and set yourself up for easier repayment later. To manage it wisely:

  • Borrow strategically. Withdraw only what you need to minimize interest charges.
  • Make principal payments early. Although many HELOCs allow interest-only payments during the draw period, paying down the principal reduces your balance and makes the transition into the repayment phase smoother.
  • Review fees. Some lenders charge account maintenance, transaction, and/or inactivity fees.[3] Being aware of these fees in advance may help you avoid unnecessary expenses.
  • Watch for variable interest rates. HELOCs often have adjustable interest rates, meaning that the rate may fluctuate as market conditions change[3] You may want to monitor rate changes and budget for potential increases in monthly payments. If you prefer the predictability of a fixed interest rate, look for a HELOC with a fixed-rate lock option.  
  • Track your utilization ratio. High balances may affect your credit score if your lender reports the HELOC as revolving credit to the credit bureaus. Keeping your principal balance below 30% of the line’s credit limit may help protect your credit score.[4]

How to Navigate the Transition from Draw Period to Repayment Period

Transitioning from the HELOC draw period to the repayment period may bring significant changes to your monthly payments and overall financial planning, particularly if the draw period payments did not include principal.[2] Here’s how to navigate this shift effectively:

  • Review your HELOC terms early. Well before the draw period ends, check your HELOC agreement to understand when the repayment phase starts, how long it lasts, and how your payment amount will change compared to the draw period.
  • Request an estimated payment schedule. Ask your lender for a forecast of what your monthly payments will be once the repayment period begins so you may budget accordingly.
  • Prepare for variable interest rates. If your HELOC has a variable rate, future payments may fluctuate.[3] Factor in potential rate increases when planning your repayment strategy.

Options for Borrowers at the End of the Draw Period

If the larger payments during the repayment period are likely to present a financial challenge for you, you may want to consider the following alternative options: 

  • Refinancing to another HELOC. Replacing your current HELOC with a new HELOC effectively restarts the clock with a fresh draw period that you may use to begin making principal and interest payments. This allows you to spread the balance over more months, which reduces the monthly amount due. 
  • Refinance to a fixed-rate HELOC or home equity loan. If you are concerned about the potential for interest rate increases under a variable-rate HELOC, consider refinancing to a fixed-rate HELOC or home equity loan for more predictable payments over the long term.  
  • Consider a cash-out mortgage refinance. If current mortgage interest rates are lower than the rate on your existing primary mortgage, you might benefit from a cash-out refinance. This would replace your primary mortgage with a higher-balance mortgage, allowing you to use the difference to pay off your HELOC while securing a more favorable interest rate on your entire mortgage balance. You may also be able to turn the additional equity you have built up in your home into funds that you can use to achieve your financial goals.

HELOC Draw Period FAQs

When Can You Access HELOC Funds?

You may access HELOC funds at any point during the draw period, which will be clearly outlined in the written agreement. 

What Is a Typical Draw Period for a HELOC?

Draw periods in the U.S. commonly range between three and 10 years.

What Happens If You Don't Use Your HELOC Funds?

If you don’t use your HELOC funds, there is no principal balance or interest to be repaid. However, you may incur account maintenance fees and/or inactivity fees (which would be clearly outlined in the agreement).

Can I Repay a HELOC During the Draw Period?

It is generally a good idea to start paying down the balance on your HELOC during the draw period, even if your agreement allows for interest-only payments during this time. Doing so could reduce the total interest expense while preserving some of the credit line to be used later in the draw period if needed. Paying down some of the principal balance during the draw period could even potentially boost your credit score by reducing the amount of available credit being used.

Can You Pay Off Your HELOC Early?

Most HELOCs allow early repayment, although some may include a prepayment penalty for early payoffs. If your agreement contains a prepayment penalty, you may compare the cost of the penalty to the potential interest savings to determine if paying off your HELOC early makes financial sense. It’s also worth noting that paying off the balance in full could close or freeze the line, depending on your lender's policy. Before paying the balance in full, confirm whether the line will become inaccessible once paid. 

How To Determine If a HELOC Is Right for You

HELOCs are useful options for homeowners who want flexible access to funds. They often work well for homeowners who have sufficient home equity, maintain a good credit score, make mortgage payments on time, and earn enough money to repay amounts borrowed (plus interest).[3]

By understanding how draw and repayment periods work, you may decide whether a HELOC aligns with your long-term financial goals and is a suitable option for you.

    The property securing the CHELOC must be located in a state where PNC offers home equity products. PNC does not offer the CHELOC product in Alaska, Hawaii, Louisiana, Mississippi, Nevada and South Dakota.