To get cash from a HELOC, you use one of four methods your lender sets up when the line opens: convenience checks written against the account, a linked debit or access card, online transfers into your checking account, or wire transfers for time-sensitive payments. Each withdrawal, called a draw, reduces your available credit by that amount, and interest accrues only on what you actually borrow, not on your full credit limit. You can keep drawing, repaying, and drawing again throughout the draw period, which most lenders set at up to ten years.
The Four Ways to Withdraw
Lenders don’t all offer every method, so ask which ones apply to your account before you need the money.
- Convenience checks. Your lender issues a checkbook tied to the HELOC. You write checks to a contractor, a creditor, or yourself, and the cleared amount posts as a draw.
- A HELOC-linked card. Some lenders provide a card usable at point-of-sale terminals or ATMs. ATM cash withdrawals carry daily caps that typically fall between $300 and $1,500. If you need more than that in a single day, pick another method.
- Online or mobile transfers. Log into your bank’s portal and move funds from the HELOC into a checking or savings account. Same-institution transfers often clear the same day; cross-bank transfers usually take one to three business days.
- Wire transfers. A wire gets funds delivered within hours, which matters for closings or contractor deposits. Banks typically charge $20 or more for domestic wires, and international wires run higher.
Whichever method you use, the lender tracks a running balance against your approved limit.
When You Can Actually Withdraw
Withdrawals happen during the draw period, the window that begins at closing and commonly runs up to ten years, though some lenders set it as short as three or five. The account is fully revolving during this stretch: as you pay principal back, that credit becomes available again without a new application.
Once the draw period closes, you can’t take out any more money. The HELOC shifts into the repayment period, which typically runs ten to twenty years, and your payments start covering both principal and interest until the balance is gone. If you sell the home before then, the outstanding balance gets paid off from the sale proceeds because the lender holds a lien on the property.
How Much You Can Draw
Your overall credit limit is set at closing using a combined loan-to-value ratio (CLTV). Lenders add your first mortgage balance to the HELOC credit limit and compare that total to your home’s appraised value. Most cap the CLTV around 85 percent. On a $400,000 home, total debt across both loans cannot exceed $340,000; if you still owe $280,000 on the primary mortgage, the HELOC limit tops out near $60,000.
Individual draws have their own rules. Many HELOC agreements set a minimum withdrawal amount. The Consumer Financial Protection Bureau notes that some plans require you to borrow a minimum each time, such as $300, or to keep a minimum amount outstanding.1Consumer Financial Protection Bureau. What You Should Know About Home Equity Lines of Credit Some lenders also require an initial draw when the line first opens, from a few hundred to several thousand dollars depending on the size of the credit line.
For withdrawals above $25,000 or $50,000, expect additional verification, such as a signed authorization form or a phone confirmation. Those fraud-prevention steps can add a day or two, so build that into your timeline for a large payment.
What the Cash Costs You
Interest applies only to your outstanding balance. Draw $15,000 against a $100,000 line and you pay interest on $15,000.
Most HELOCs carry a variable rate built from two pieces: an index (nearly always the U.S. Prime Rate) plus a fixed margin your lender sets at closing. The margin doesn’t change, but the index moves with market conditions, so your rate can shift month to month. During the draw period, lenders typically require interest-only payments. On a $20,000 balance at 7 percent, that runs roughly $117 per month. Interest-only payments keep the account current but don’t reduce principal, so anything you pay above the minimum frees up available credit.
Fixed-Rate Lock Option
Some lenders let you convert part or all of a variable-rate balance into a fixed rate for a set term. You can typically hold up to three fixed-rate locks at once, and as you pay down a locked portion, that credit becomes available again at the variable rate. Not every lender offers this feature, and some charge around $75 each time you lock after the initial setup. If you’re pulling a large amount and want a predictable payment, ask before you draw.
Upfront and Ongoing Fees
Opening a HELOC has costs even when the lender advertises “no closing costs.” Typical charges include:
- Appraisal fee, usually $300 to $500, though some lenders accept an automated valuation instead.
- Origination fee, often 0.5 to 1 percent of the credit line, waived by many lenders.
- Title search of roughly $75 to $250, with title insurance adding 0.5 to 1 percent of the loan amount if required.
- Recording fee for filing the lien, generally $25 to $150 depending on your county.
After the line is open, watch for annual fees or inactivity fees if you don’t use the line for a year or more. No-closing-cost promotions often include a clawback if you close the account early, so read the promotional terms before assuming the line is free.
Your Lender Can Freeze or Cut the Line
The credit limit you were approved for isn’t guaranteed for the life of the account. Federal regulations allow lenders to freeze your line or reduce your credit limit if your home’s value drops significantly below the appraisal used at opening.2Consumer Financial Protection Bureau. 1026.40 Requirements for Home Equity Plans The regulatory threshold is specific: a significant decline occurs when the equity cushion above your combined debt shrinks by 50 percent. If your home was appraised at $300,000 with a $200,000 first mortgage and a $60,000 HELOC, the cushion was $40,000; losing half of that ($20,000) opens the door to a freeze.
The lender doesn’t need your permission and isn’t required to order a new appraisal before acting, though a genuine decline in value must exist.3HelpWithMyBank.gov. Can the Bank Freeze My HELOC Because the Value of My Home Declined? If you’re counting on future draws to finance a phased project, a market downturn could cut off funds you were planning to use.
Three-Day Right to Cancel at Opening
When you first open a HELOC, federal law gives you three business days after closing to cancel the entire plan. This right of rescission exists because your primary residence is the collateral.4eCFR. 12 CFR 1026.15 – Right of Rescission You must notify the lender in writing before midnight of the third business day, and the clock starts from whichever happens last: the closing, delivery of the rescission notice, or delivery of all required disclosures.
The right applies to opening the plan, not to each withdrawal you make afterward. Once the three days pass, draws against your established limit are final. If the lender failed to provide required disclosures at closing, the rescission right can extend up to three years.
Tax Treatment of the Interest
HELOC interest is deductible only if you used the borrowed funds to buy, build, or substantially improve the home securing the line. The IRS is explicit that interest reported on Form 1098 from a HELOC is not deductible if the proceeds went to anything else, regardless of when the debt was taken out.5Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction Using a HELOC to consolidate credit card balances, cover tuition, or fund a vacation produces no deductible interest.
Even for qualifying home improvements, the total mortgage debt eligible for the interest deduction is capped at $750,000 ($375,000 if married filing separately) for debt incurred after December 15, 2017.6Office of the Law Revision Counsel. 26 U.S. Code 163 – Interest That cap combines your first mortgage and HELOC. If a single draw is split between a kitchen remodel and paying off a car loan, only the remodel portion is deductible, so separating draws by purpose keeps your records clean at tax time.
What Happens When the Draw Period Ends
The shift from interest-only draw payments to full principal-and-interest payments is where most borrowers get caught. Interest-only on a $50,000 balance at 8 percent is about $333 per month. Amortizing that same balance over 20 years at the same rate lifts the payment to roughly $418, and a 10-year repayment term pushes it near $607. Payments can double or triple depending on your balance, rate, and repayment length.
A small number of HELOC agreements require the entire balance at once when the draw period ends, called a balloon payment. It’s uncommon but worth confirming in your loan documents. If your agreement has one and you can’t pay in full, you’ll need to refinance or negotiate a modification before the deadline.
Some lenders will renew or extend the draw period before it expires, but not automatically. Federal banking regulators require lenders to evaluate your current income, credit, and ability to repay using essentially the same underwriting standards as a new HELOC application.7Office of the Comptroller of the Currency. Interagency Guidance on Home Equity Lines of Credit Nearing Their End-of-Draw Periods Starting that conversation at least six months before the draw period ends gives you time to explore alternatives if renewal isn’t offered.
Default Puts the Home at Risk
A HELOC is a mortgage, and your home is the collateral. If you stop paying, the lender can foreclose, even though the HELOC typically sits in second position behind your primary mortgage. If a foreclosure sale doesn’t cover both debts, the HELOC lender may pursue a deficiency judgment for the remaining balance, which can lead to wage garnishment. Treating a HELOC like a credit card because it revolves is a common mistake; the consequences of missing payments are considerably more serious.