A home equity line of credit has to be paid off in full by its maturity date, which usually falls 20 to 30 years after you open the account. That window is split in two: a draw period of about 10 years when you can borrow and typically owe only interest, followed by a repayment period of 10 to 20 years when you pay down the balance. The deadline can also arrive earlier if you sell the home, refinance, transfer title outside a protected exception, or default on the loan.
The Draw Period and the Switch to Repayment
For the first 10 years of most HELOCs, you can borrow up to your credit limit and typically owe only interest each month. On an $80,000 balance at 8% interest, that runs roughly $533 a month. Those payments cover the cost of borrowing without touching the principal.
When the draw period ends, the line converts to its repayment phase, usually 10 to 20 years long. You can no longer borrow, and payments now include principal. The same $80,000 balance stretched over a 15-year repayment schedule at the same rate could roughly double the monthly payment. Your lender has to disclose these repayment terms before you open the account, including an example showing what a $10,000 balance would cost under minimum payments.
Most HELOCs carry variable rates tied to the prime rate plus a margin. If rates have risen since you opened the line, the payment jump at the start of repayment can be steeper than the original disclosures suggested, because a higher rate is now hitting an amortizing balance rather than an interest-only one.
What Happens at the Maturity Date
The maturity date is a hard deadline. Every dollar still owed must be paid by that date. If your repayment schedule fully amortized the balance, you arrive at maturity owing nothing. Some HELOCs, especially those that continued interest-only payments into repayment, leave a lump sum called a balloon payment due at the end.
A balloon can be sizeable. If minimum payments barely touched the principal, the outstanding balance at maturity may be close to what you originally borrowed. Missing the maturity deadline is a breach of the loan agreement and gives the lender grounds to pursue foreclosure.
Options If You Can’t Cover the Balloon
Borrowers facing a balloon they can’t pay have a few paths. You can refinance the remaining balance with your current lender or a new one. Some lenders offer modifications that extend the repayment term. You could also take out a separate loan to cover it. The worst move is doing nothing. If the maturity date passes with a balance outstanding, the lender can start foreclosure and you could lose the home.
The CFPB suggests comparing HELOC offers based partly on whether the lender allows renewal or refinancing of the balance at maturity, which is easier to sort out before you sign than after.
Selling the Home
A HELOC is a lien against your property. When you sell, every lien has to be cleared before title transfers. During closing, the title company or attorney requests a payoff statement from your HELOC lender showing the exact balance plus daily interest through the closing date. Sale proceeds pay the primary mortgage first, then the HELOC, and anything left goes to you.
The complication comes when the home is worth less than the combined loan balances. You’d need to bring cash to closing to cover the gap. Without those funds, a short sale is one option, but it requires approval from both the primary mortgage lender and the HELOC lender. Other borrowers accelerate HELOC payments, wait for property values to recover, or take out a personal loan to close the shortfall.
HELOCs are typically recourse loans, so the lender may pursue you for a remaining balance even after a short sale or foreclosure. Whether a lender actually seeks a deficiency judgment depends on your finances and state law, but the possibility exists.
Property Transfers and Inheritance
Most HELOC contracts include a due-on-sale clause that makes the entire balance payable when ownership changes hands. Federal law carves out important exceptions. Under the Garn-St. Germain Act, a lender cannot accelerate the loan when the property transfers in any of these situations:
- A transfer to a relative resulting from the borrower’s death, or an automatic transfer when a joint tenant or co-owner dies.
- A transfer that adds a spouse or child as an owner of the property.
- A transfer to a spouse under a divorce decree or separation agreement.
- A transfer into a living trust where the borrower remains a beneficiary and continues living in the home.
These protections apply to loans secured by residential property with fewer than five units.1Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions If a family member inherits a home with an outstanding HELOC, the lien stays attached to the property, but the lender can’t demand immediate repayment just because ownership changed. The new owner still has to handle payments or eventually pay off the balance.
Refinancing and Voluntary Early Payoff
Refinancing is one of the most common ways to pay off a HELOC before maturity. In a cash-out refinance, you replace the primary mortgage with a larger one and use the extra proceeds to pay the HELOC in full. The HELOC lender then files a lien release, and you’re left with a single mortgage payment.
You can also replace one HELOC with a new one for better terms, a lower rate, or a fresh draw period. The new lender pays off the old line at closing. Either route brings closing costs, including an appraisal, title search, and lender fees, running from several hundred to a few thousand dollars.
You can pay down or pay off the balance at any time. Nothing requires you to keep the line open for the full term. Some lenders do charge an early termination fee if you close the account within the first two to three years, typically a flat amount in the range of $300 to $500 rather than a percentage. Any such fee has to be disclosed before you open the account.2Consumer Financial Protection Bureau. 12 CFR Part 1026 (Regulation Z) – Section 1026.40 Requirements for Home Equity Plans After that early window closes, paying off and closing the account usually costs nothing beyond interest accrued to the payoff date.
When a Lender Can Demand Full Payment Early
Outside the normal timeline, a lender can accelerate the loan and demand the entire balance at once. The most common trigger is missed payments, typically three months of delinquency before the lender acts. Other defaults can also trigger acceleration, including letting homeowners insurance lapse, allowing the property to deteriorate, or transferring title without lender consent.
Before accelerating, the lender must send a breach letter specifying the default, the steps required to cure it, and a deadline that is usually at least 30 days out. If you catch up on missed payments, pay the lender’s legal costs, and resolve whatever triggered the notice, the acceleration stops and the loan returns to its normal schedule. Ignore the letter, and foreclosure begins. Legal fees, late penalties, and property inspection costs get added to the balance during that process.
Credit Line Freezes Before Acceleration
Before acceleration, a lender has a softer tool: freezing or reducing your available credit during the draw period. Federal regulations allow this in specific circumstances:
- The home’s value drops significantly below its appraised value when the HELOC was opened. Regulatory commentary generally treats “significant” as the gap between your credit limit and available equity shrinking by half.
- The lender reasonably believes you can’t meet your repayment obligations due to a material change in your finances, such as a major loss of income.
- You’ve failed to meet a material obligation under the agreement.
These freezes are meant to be temporary. Once the condition that justified the freeze no longer exists, the lender must reinstate your credit privileges.2Consumer Financial Protection Bureau. 12 CFR Part 1026 (Regulation Z) – Section 1026.40 Requirements for Home Equity Plans The lender can monitor the situation itself or require you to request reinstatement, but a permanent freeze isn’t allowed once the triggering condition has passed. A freeze on its own doesn’t move up your payoff deadline; your existing balance still follows the original schedule.