To repay a HELOC, you make interest-only payments during the draw period (usually up to ten years), then principal-and-interest payments during the repayment period that follows (often fifteen to twenty years). The size of your payment, how much it will rise when the phases change, and what you can do about that rise all depend on the terms in your loan agreement.
What Your Agreement Tells You
Find your closing documents and look for three things: the length of the draw period, the date the repayment period begins, and the interest rate structure. The draw-end date is the one that matters most, because that is when your monthly payment changes shape.
Most HELOCs carry a variable rate set by adding a fixed margin to a benchmark index, usually the U.S. Prime Rate. If Prime is 8.50% and your margin is 2%, your rate is 10.50%. Because the index moves with the market, your payment can change from one billing cycle to the next. Your agreement also discloses a lifetime cap, the highest rate the lender can charge you no matter where the index goes, and some plans include periodic caps limiting how much the rate can jump at any single adjustment.1eCFR. 12 CFR 1026.40 – Requirements for Home Equity Plans Your periodic billing statement shows the current balance, current rate, and how the charge was calculated.2eCFR. 12 CFR 1026.7 – Periodic Statement
Payments During the Draw Period
During the draw period you can borrow, repay, and borrow again up to your credit limit, similar to a credit card. Most lenders require only interest each month. The math is simple: multiply your outstanding balance by the annual rate, then divide by twelve. A $50,000 balance at 7% produces about $292 in interest for the month. That number resets each cycle based on what you currently owe and the current rate.
You are not required to pay principal during this phase, but paying some anyway is often the single best move you can make. Every dollar of principal you knock down lowers the interest that accrues the next month, and it reduces the balance that will be amortized when the repayment period starts. A smaller starting balance means a smaller monthly bill for the entire repayment term.
Miss the minimum interest payment and you can trigger late fees and a credit report hit. Keep missing it and the lender can terminate the plan and demand the full balance immediately.3Consumer Financial Protection Bureau. 12 CFR 1026.40 – Requirements for Home Equity Plans Because your home secures the debt, that path ends in foreclosure.
Payments During the Repayment Period
When the draw period ends, the line closes to new borrowing and the HELOC converts into a standard amortized loan. Your payment now includes principal and interest, spread across the remaining term. The lender will send you an updated amortization schedule showing how each payment is split and when the balance will reach zero.
The jump can be large. That same $50,000 balance that cost roughly $292 a month in interest-only payments at 7% would run about $449 a month on a fifteen-year amortization at the same rate. If the rate has climbed during the draw period, the increase stacks on top of that.
Locking a Fixed Rate Before the Shift
Some lenders offer a fixed-rate conversion feature that lets you move all or part of your variable balance to a fixed rate while you are still in the draw period. The locked portion converts to principal-and-interest payments at a predictable rate; anything unlocked keeps floating. For example, U.S. Bank lets borrowers lock portions of the balance for terms between one and twenty years, with a $2,000 minimum and up to three active locks at once.4U.S. Bank. Home Equity Line of Credit (HELOC) With a Fixed-Rate Option This option is typically available only during the draw period, so if rising rates concern you, ask your lender whether it is offered on your plan while you still have time to use it.
If Your HELOC Has a Balloon Instead
Not every HELOC amortizes. Some agreements end with a balloon payment, meaning the entire remaining principal is due in a single lump sum on the maturity date. The lender must disclose this at account opening.1eCFR. 12 CFR 1026.40 – Requirements for Home Equity Plans Your agreement and state law set the required advance notice; some states require at least 90 days. When notice arrives it will state the exact payoff amount, and payment is usually made by wire or cashier’s check. Missing a balloon is treated as default and can lead to foreclosure, so if your loan has this structure, start planning well before the due date, including whether refinancing the balance into a new loan is the more realistic path.
How to Submit Payments
Most lenders accept payments several ways:
- Online through the lender’s portal, as a one-time or recurring payment from a linked bank account. This is the fastest method and makes it easy to pay more than the minimum.
- Automatic recurring transfers, which remove the risk of forgetting a due date.
- By phone, authorizing a payment with your bank account information.
- By mail, sending a check or money order with the payment coupon from your statement and your account number on the memo line. Allow several business days for delivery before the cutoff.
When you pay more than the minimum, confirm that the extra is being applied to principal rather than held as a credit toward future interest. Some lenders apply extra payments to principal only when you tell them to.
Paying Off the Balance Early
You can pay off a HELOC at any time by sending larger payments or clearing the balance in one lump sum. Most HELOC agreements do not charge prepayment penalties, but this is not guaranteed; if one exists, it has to be disclosed in your original agreement.3Consumer Financial Protection Bureau. 12 CFR 1026.40 – Requirements for Home Equity Plans Check your documents for an early-termination fee before you write the final check.
Another route is refinancing the HELOC balance into a fixed-rate mortgage through a cash-out refinance, which replaces both your primary mortgage and the HELOC with a single new loan. Closing costs typically run 2% to 5% of the new loan amount, and most lenders cap cash-out refinances at 80% of the home’s current value. The math works when the interest savings or a predictable fixed payment are worth the upfront cost.
Selling the Home Before the HELOC Is Paid Off
The HELOC is secured by a lien on your property, so the outstanding balance has to be paid in full before title transfers. You cannot move the HELOC to a new property or keep it open after the sale. At closing, the title company pays the primary mortgage first, then uses what remains to pay off the HELOC as the second lien, and anything left after closing costs comes to you. If the sale proceeds will not cover both loans, you have to bring the shortfall to closing yourself.
If You Cannot Make the Payment
Call your lender before you fall behind. Lenders generally prefer a workout to a foreclosure, and the options that may be on the table include:
- A loan modification that permanently changes a term of the loan, such as extending the repayment period or lowering the rate, to bring the payment down.
- A forbearance that temporarily pauses or reduces payments while you recover from a short-term hardship, with the missed amounts repaid later in a lump sum or on a schedule.
- A repayment plan that lets you catch up on past-due amounts by adding a portion to each regular payment for a set period.
- A refinance that rolls the HELOC into a new fixed-rate mortgage over a longer term, lowering the monthly obligation but adding closing costs.
What is actually available depends on the lender and your circumstances. If your lender is unresponsive, a HUD-approved housing counselor can help you work through the options at no cost.
Interest Deductibility
Interest you pay on a HELOC may be deductible, but only if you used the borrowed money to buy, build, or substantially improve the home that secures the loan.5Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction If you used the funds for anything else, such as paying off credit cards or covering medical bills, the interest is not deductible.
For loans taken out after December 15, 2017, the deduction applies to the first $750,000 of combined mortgage debt ($375,000 if married filing separately).5Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction Your HELOC balance counts toward that cap along with your first mortgage. “Substantially improve” generally means projects that add value, extend the home’s useful life, or adapt it for a new use, like a kitchen renovation, an addition, or a roof replacement. Routine maintenance such as fixing a leak or repainting typically does not qualify. Keep invoices, contracts, and receipts tying each HELOC draw to a specific project; depositing HELOC funds into a general account and mixing them with other money makes it hard to prove which dollars went where.