When your HELOC draw period ends, three things happen on the same day: you lose the ability to borrow against the line, your outstanding balance locks in as the principal you owe, and your monthly payment switches from interest-only to a fully amortized principal-and-interest schedule designed to pay off the full balance over the repayment term. For borrowers who paid only interest during the draw period, the new payment commonly runs 40% to 80% higher than the old one. The date this happens is printed in your original loan agreement, so the transition itself is never a surprise, even if the payment often is.
The Three Things That Change on the Transition Date
First, the credit line closes. No more draws, no more re-borrowing against what you’ve paid down. Whatever room was left on the line disappears.
Second, your balance becomes fixed. The amount you owe on the day the draw period ends is the principal that must be paid off during the repayment phase.
Third, the payment structure changes. Instead of covering only the interest each month, you now pay principal and interest on a schedule calculated to zero out the balance by the end of the repayment term. That term varies by lender and by your original agreement. Some repayment windows run as short as five years; others stretch to 20 or longer. The shorter the window, the higher your monthly payment, because the same debt is compressed into fewer installments.
Most lenders send a written notice as the transition date approaches, showing your new payment based on your current balance and rate. Read it carefully when it arrives. The numbers in that letter are your reality for the next decade or two.
How Much the Payment Actually Jumps
The payment increase is the biggest financial shock most HELOC borrowers face. The math is straightforward.
Take a $75,000 balance at 8% interest. During the draw period, an interest-only payment runs about $500 a month. When repayment begins:
- On a 15-year repayment term, the monthly payment rises to roughly $717, an increase of about $217 (a 43% jump).
- On a 10-year repayment term, it climbs to roughly $910, an increase of about $410 (an 82% jump).
Those figures assume the rate holds steady at 8%. Because HELOC rates are variable, the actual payment can land higher if rates rise before or during repayment. Borrowers who paid only interest throughout the entire draw period feel the full force of the increase. Those who voluntarily paid down principal along the way face a smaller balance at transition and a proportionally softer landing.
The Interest Rate Usually Stays Variable
A common misconception is that the rate locks in or converts to a fixed rate when repayment begins. In most cases, it does not. The same variable-rate structure that applied during the draw period continues through repayment. Your rate still floats with the prime rate plus the margin set when you opened the line, and your payment adjusts accordingly.1Bankrate. How Fed Moves Impact HELOCs and Home Equity Loans
This creates compounding exposure. During the draw period, a rate increase only moved an interest-only payment. During repayment, a rate increase hits a larger amortized payment that already includes principal, so the dollar impact of each hike is magnified. Federal banking regulators have flagged this double exposure as a consumer risk and recommend that borrowers approaching the end of the draw period evaluate whether they can absorb both the shift to principal-and-interest and potential future rate increases.2Federal Reserve. Interagency Guidance on Home Equity Lines of Credit Nearing Their End of Draw Periods
Older HELOCs May Have a Balloon Payment Instead
Not every HELOC converts into an amortized repayment schedule. Some agreements require the entire outstanding balance to be paid in a single lump sum when the draw period ends. That’s a balloon payment, and it can mean a demand for tens of thousands of dollars all at once.
Balloon-payment HELOCs are less common in the current market because any loan structured this way is classified as a non-qualified mortgage, which limits the lenders willing to offer them. But they exist, and borrowers who signed one years ago may be approaching that deadline now. If your agreement includes a balloon, the possibility had to be disclosed upfront in the initial account disclosures.3Consumer Financial Protection Bureau. 12 CFR 1026.40 – Requirements for Home Equity Plans Pull your original paperwork and check. If you have one, line up a refinance well before the due date. Counting on being able to refinance at the last minute is a gamble that doesn’t always pay off.
What Default Looks Like
A HELOC is secured by your home. If you fall behind during the repayment phase, the lender can foreclose even if your first mortgage is completely current.4Federal Trade Commission. Home Equity Loans and Home Equity Lines of Credit The HELOC lender holds a lien on your property and has the same enforcement tools available to any mortgage lender.
The process varies by state. It generally starts with a notice of default after a set number of missed payments, followed by a cure period during which you can catch up. If the default continues, the lender can schedule a sale. In practice, HELOC lenders often pursue foreclosure only when there’s enough equity in the home to cover what they’re owed after the first mortgage is satisfied. When there isn’t, the lender might instead seek a deficiency judgment in court, which gives them the right to collect through wage garnishment or bank account levies. Whether a deficiency judgment is available depends on state law.
The point is that HELOC debt isn’t unsecured. Ignoring the payments doesn’t make them go away. It puts the house at risk.
How the Account May Be Reclassified on Your Credit Report
During the draw period, a HELOC typically appears on your credit report as revolving debt, like a credit card, and the balance factors into your credit utilization ratio. The standard advice is to keep that ratio below 30%.5Equifax. Installment vs. Revolving Credit and Key Differences A HELOC with a high balance relative to its limit can drag the ratio down and pull your score with it.
When repayment begins, credit bureaus may reclassify the account from revolving to installment debt. Installment debt doesn’t factor into utilization the same way. For some borrowers, this reclassification actually helps the score by removing a high-utilization revolving account from the calculation. If the HELOC was one of your few revolving accounts, though, losing it from that category could trim the diversity of your credit mix, a smaller but real scoring factor. On-time payments during repayment keep building your history; missed ones damage it, since payment history is the largest input in most scoring models.
Your Options Before and at the Transition
You have several paths. The right one depends on your balance, your equity, your credit, and how much payment shock you can absorb.
Pay Down Principal During the Draw Period
The most cost-effective move requires no new loan, no closing costs, and no negotiation. Every extra dollar of principal you pay now shrinks the balance that will eventually amortize. Even a few hundred dollars a month above the interest-only minimum can meaningfully reduce the eventual jump. This is the only strategy that avoids both the shock itself and the expense of refinancing into something else.
Refinance Into a Fixed-Rate Home Equity Loan
Converting the balance into a fixed-rate home equity loan locks in a predictable monthly payment and eliminates the variable-rate risk that otherwise follows the HELOC into repayment. The tradeoff is closing costs, which generally run 2% to 5% of the loan amount. On a $75,000 balance, that’s $1,500 to $3,750 out of pocket or rolled into the loan.
Cash-Out Refinance on Your Primary Mortgage
A cash-out refinance replaces your existing first mortgage with a larger one and uses the extra proceeds to pay off the HELOC. Both debts collapse into one payment, often at a lower rate than the HELOC. The downside is real: you’re resetting the clock on your primary mortgage, which means more years of interest and a higher total cost even when the monthly payment drops. Closing costs on a full mortgage refinance also tend to be higher than on a standalone home equity loan.
Fixed-Rate Conversion Inside Your Existing HELOC
Many lenders offer an internal conversion feature that lets you lock all or part of your variable-rate balance into a fixed-rate segment within the same account. The converted portion gets its own repayment schedule, and you avoid the closing costs of a separate refinance. This option is typically limited to one or two uses during the life of the loan, and the quoted fixed rate may carry a premium over market rates. Not every lender offers it. Check your agreement or call to ask.
Request a Modification
You can ask your current lender to modify the repayment terms. A modification might extend the repayment period, lowering the monthly payment by spreading principal over more years. Lenders aren’t required to agree, and they typically want to see evidence of financial hardship. The longer timeline means more total interest, but it keeps the monthly bill manageable and avoids default.
Open a New HELOC
With sufficient equity and good credit, you can open a new HELOC to replace the expiring one and get a fresh draw period. This works if your financial situation has improved or you genuinely need ongoing flexible access to funds. It’s a poor strategy if you’re simply deferring a balance you can’t afford to repay, because the same transition and the same risks will arrive again in another decade.